The IMF says a prolonged increase in energy prices could boost inflation and lower growth

The International Monetary Fund warned on Thursday that a sustained spike in energy prices stemming from the conflict in Iran could drive up global inflation and weigh on economic growth, as the institution steps up monitoring of disruptions to energy markets.

In her first public remarks since the outbreak of hostilities, IMF spokesperson Julie Kozack told reporters that the war had already caused major disruptions to seaborne oil and natural gas shipments, pushing crude oil prices more than 50 percent higher to surpass $100 a barrel. She added that the IMF was closely tracking developments and assessing the broader macroeconomic implications.

While the Fund has not received any formal requests for emergency financing, Kozack said it stood ready to support member countries as needed. IMF officials, she noted, were actively engaging with finance ministers, central bankers, and regional institutions across affected regions.

The overall economic impact of the conflict, Kozack cautioned, would depend on its duration, intensity, and geographic spread. The IMF plans to incorporate the effects of the war into its updated global economic outlook, scheduled for release in mid-April during the IMF-World Bank spring meetings.

Citing an internal “rule of thumb,” Kozack said that a sustained 10 percent rise in energy prices over the course of a year typically adds about 40 basis points to global inflation and reduces global output by 0.1 to 0.2 percentage points. With oil prices now hovering above $100 a barrel, she noted that if such levels persist for a full year, the cumulative effect on inflation and output would be significant.

In response to rising energy costs, Kozack urged central banks to remain vigilant, particularly in assessing whether inflationary pressures are broadening beyond the energy sector and whether inflation expectations remain well anchored.

Turning to regional implications, Kozack said the IMF’s preliminary assessment suggested the war would weigh on growth in the Gulf Cooperation Council (GCC) countries, though she did not provide specific estimates. Much would depend, she added, on the ability of those countries to sustain or resume oil and gas exports amid the ongoing disruptions.

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