The International Monetary Fund has warned that “all roads lead to higher prices and slower growth worldwide” should the conflict in the Middle East continue to throttle the amount of oil, gas and fertiliser making its way out of the Gulf.
In a stark message that countries on all continents will be affected, the Washington-based organisation said a rise in energy and food costs would harm economic growth this year and could leave lasting scars on the global economy.
Coming only hours after Donald Trump threatened to obliterate Iran’s energy infrastructure unless it agreed to a peace deal, the IMF’s analysis is likely to be viewed as a warning to the White House over the war’s lasting consequences for struggling households.
In a blogpost by the IMF’s main department heads, including the chief economist, Pierre-Olivier Gourinchas, the IMF said governments with high levels of borrowing will also have limited access to funds that could be used to cushion the worst effects of the crisis.
“Although the war could shape the global economy in different ways, all roads lead to higher prices and slower growth,” it said.
While some countries that are net exporters of oil and gas, such as the US, will gain from higher fossil fuel prices, the rise in bills for petrol, diesel and food will harm living standards, the analysis found. Businesses are also forecast to come under pressure to raise prices, possibly forcing central banks to raise interest rates to combat inflation.
“A short conflict might send oil and gas prices soaring before markets adjust, while a long one could keep energy expensive and strain countries that rely on imports,” the blogpost warned. “Or the world may settle somewhere in between – tensions linger, energy stays costly, and inflation proves hard to tame – with ongoing uncertainty and geopolitical risk.”
“Much depends on how long the conflict lasts, how far it spreads, and how much damage it inflicts on infrastructure and supply chains,” it said, adding: “Historically, sustained oil‑price spikes have tended to push inflation higher and growth lower.
About a third of fertiliser production travels through the strait of Hormuz, pushing up prices. UN Food and Agriculture Organisation projections indicate that global prices could average 15% to 20% higher in the first half of 2026 if the crisis persists.
Natural gas prices have more than doubled in the UK since last December to about £140 a therm, while a barrel of Brent crude that cost about $60 before the conflict hit more than $116 on Monday before falling back to $112.
Forecasts for sharp rises in the cost of gas and electricity in Europe next winter are forcing governments to consider higher subsidies and welfare payments to the worst-affected households.
The IMF added: “In Europe, the shock is reviving the spectre of the 2021–22 gas crisis, with countries such as Italy and the UK especially exposed by their reliance on gas‑fired power, while France and Spain are relatively protected by their greater nuclear and renewables capacity.”
