WASHINGTON — A global oil shock tied to the Middle East conflict is set to slow economic growth and push inflation higher across energy-importing countries, International Monetary Fund Managing Director Kristalina Georgieva said Thursday.
Speaking ahead of the IMF and World Bank Spring Meetings, Georgieva said the disruption has reduced global oil supply by about 13 percent and liquefied natural gas supply by roughly 20 percent, driving up energy prices and straining supply chains worldwide.
“As always, a negative supply shock pushes prices up,” she said, noting that Brent crude surged from about $72 per barrel before the conflict to a peak of $120.
Although prices have eased from those highs, they remain well above pre-conflict levels, with many countries paying steep premiums for fuel access.
Georgieva described the shock as global in scope but uneven in its effects. Economies that rely heavily on imported energy are expected to be hit hardest, while exporters may see more limited impact.
The effects are already spreading across industries. Fuel shortages and refinery disruptions have constrained diesel and jet fuel supplies, weighing on transportation, trade, and tourism.
Food security is also deteriorating. Georgieva warned that “another 45 million people or more” could face hunger as supply disruptions deepen, pushing the global total beyond 360 million.
She said the shock is being transmitted through three main channels: higher prices and shortages, rising inflation expectations, and tighter financial conditions.
“Higher prices for key inputs feed into many consumer goods, lifting inflation,” she said, adding that inflation expectations could “ignite a costly inflation process” if left unchecked.
Financial markets have reacted with wider emerging market bond spreads, shifts in equity valuations, and a stronger U.S. dollar, though some of these pressures have eased in recent days.
“Despite earlier momentum driven by strong technology investment and supportive financial conditions, the IMF now expects global growth to weaken,” Georgieva said.
“Even our most hopeful scenario involves a growth downgrade,” she added, citing infrastructure damage, ongoing supply disruptions, and weakening confidence.
Damage to energy infrastructure remains a key concern. Qatar’s Ras Laffan complex, which produces 93 percent of the Gulf’s LNG, has been shut down and could take three to five years to fully restore operations.
Georgieva noted that more than 80 percent of countries are net oil importers, leaving them particularly vulnerable to prolonged price shocks, especially those with limited fiscal capacity.
She urged governments to avoid measures such as export controls or price caps that could exacerbate the situation.
“Don’t pour gasoline on the fire,” she said.
Central banks, she added, should stay focused on maintaining price stability and be prepared to act if inflation expectations become unanchored. Fiscal support, she said, should remain “targeted and temporary.”
The IMF expects demand for balance-of-payments support to rise to between $20 billion and $50 billion in the near term, depending on how the conflict unfolds. (Source: IANS)
