IMF warns that the Middle East could produce new global shocks
The International Monetary Fund warned at the beginning of March that new wartime disruptions in the Middle East are already creating shocks to trade, economic activity, energy prices and financial markets, and that their full impact may only still come due if the crisis is prolonged. The message from Washington and from statements by the Fund’s head Kristalina Georgieva is not dramatic in the sense of announcing an imminent collapse of the world economy, but it is very serious in its assessment that the global system is once again exposed to a shock that can arrive in several forms at once: through more expensive energy, more expensive transport, higher inflation, weaker growth and additional nervousness in capital markets. It is precisely in this that the IMF sees the greatest risk for 2026, because after a series of crises in recent years the world economy is showing resilience, but at the same time has less and less room for mistakes in monetary, fiscal and energy policy.
In its official statement of March 3, the IMF said that it is closely monitoring developments in the Middle East and that disruptions in trade and economic activity, rising energy prices and increased volatility in financial markets are already visible. A few days later, on March 5 in Bangkok, Georgieva warned that the resilience of the world economy is “once again being tested” and that a more prolonged conflict could hit market sentiment, economic growth and inflation. In a speech on March 9, she further emphasized that for a large part of Asia, but also for the rest of the world, energy security has suddenly jumped to the top of the priority list. In doing so, the IMF practically summarized the central problem of the current crisis: this is not just about a region affected by war, but about a point where energy, maritime transport, cargo insurance, inflation expectations and central bank decisions overlap.
Why the Middle East remains a global risk point
The reason why conflicts in the Middle East still have such a strong international impact lies in the fact that it is one of the world’s key energy and transport arteries. The International Energy Agency warns that the Strait of Hormuz is the primary export route for oil from Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Iraq, Bahrain and Iran. The IEA further points out that any prolonged disruption of traffic through this strait does not threaten only the physical delivery of oil, but can also make a large part of the world’s spare production capacity unavailable, primarily that located in Saudi Arabia. In other words, the problem is not only that huge volumes of energy products pass through this area, but also that one of the key safety valves of the global oil market is located there.
The latest IEA data show that the war that began on February 28 has seriously disrupted flows through the Strait of Hormuz, with export volumes of crude oil and derivatives falling to less than ten percent of pre-conflict levels. Because of this, producers in the Gulf had to reduce or temporarily halt part of production. At the same time, the IEA said in March that the conflict has “major implications” for energy security, energy affordability and the world economy. Such wording is not a routine bureaucratic phrase, but a signal to markets that the risk is no longer being treated as a local disruption, but as a potential global supply shock.
From energy products to inflation: how the shock spills over to the rest of the world
When the IMF warns of possible “new shocks in different forms”, in practice it means a chain reaction. The first transmission channel is almost always energy. Rising oil and gas prices increase production, transport and logistics costs, and then spill over into the prices of food, industrial products, air transport and utility services. The second channel is financial: investors then withdraw capital from riskier markets, seek safer havens, the dollar strengthens, borrowing costs rise, and the room for developing countries to cope with new pressure weakens. The third channel is psychological, that is, the expectations of households, companies and central banks. If the market comes to believe that higher energy costs are here to stay, inflation expectations can once again become detached from the targets of the monetary authorities.
That is precisely why Georgieva warned that a lasting increase in energy prices would have a measurable global effect. According to her estimate, an increase in energy prices of ten percent lasting a year would raise global inflation by 0.4 percentage points and slow global economic growth by 0.1 to 0.2 percent. At first glance that may not sound like a dramatic shift, but in circumstances in which many central banks have only just begun to think about easing monetary policy, even a relatively small additional inflationary impulse may be enough to delay interest-rate cuts. This increases the danger of a scenario in which growth weakens while money remains expensive longer than governments and markets expected.
This is precisely the reason why markets have in recent days been particularly sensitive to movements in the price of oil. After new attacks on energy infrastructure and disruptions in maritime traffic, Brent again rose above the level of 100 dollars per barrel this week, which intensified fears of a new inflationary wave. Reuters reported that the escalation of the conflict is dramatically changing the outlook for central banks because a major supply shock creates an uncomfortable choice between supporting economic growth and fighting inflation. For countries that already have sensitive currencies, high external debt or a strong dependence on imported energy, such a choice can be especially painful.
The world economy is resilient, but not infinitely durable
The IMF does not start from the assumption that the world is entering an immediate recession. On the contrary, Georgieva reminds that the global economy has so far shown exceptional resilience and that the Fund still assumes growth of 3.3 percent. But it is important to understand the context of such an assessment. In the January update of the World Economic Outlook, the IMF estimated that global growth would amount to 3.3 percent in both 2025 and 2026, but at the same time stressed that medium-term risks remain tilted toward a weaker outcome. Among those risks, special place is occupied by new inflationary pressures, trade fragmentation, geopolitical tensions and financial instability. The current crisis in the Middle East therefore does not arrive at an “empty table”, but strikes an economy already burdened by high debt, weakened fiscal space and sensitivity to new price shocks.
This is also important for readers in Europe, including Croatia, because global shocks do not affect all countries equally, but they rarely remain limited to the area where they originated. Europe remains sensitive to energy prices, especially gas and transport costs. Asian economies have a direct dependence on maritime routes and imports of energy products from the Gulf. Developing countries at the same time face higher borrowing costs and more sensitive exchange rates. If weaker demand in large economies or the persistence of high interest rates is added to that, the consequences spread very quickly through exports, investment and consumption.
The Middle East, trade and insurance: the hidden costs of the crisis
One of the less visible, but very important, mechanisms for transmitting the crisis is the cost of maritime transport and insurance. When the risk of war activity approaches key shipping routes, not only do oil and gas prices rise, but also insurance premiums, transport costs and delivery times. This then affects a wider range of goods, from energy products, chemicals and fertilizers to industrial components and consumer goods. In practice, this means that not only refineries or energy companies may be under pressure, but also food producers, airlines, logistics firms and manufacturing industry.
That is why the IMF also speaks of financial volatility, and not only of energy prices. When investors face uncertainty about the duration of the conflict and the possible closure of critical routes, risk premiums rise on stock and bond markets. Reuters warned in recent days that because of the war in the Middle East, investors have begun to reassess part of the dominant market bets for 2026, including expectations of lower interest rates in the United States. In such an environment, even countries not directly involved in the conflict can feel the consequences through more expensive financing, weaker market confidence and more cautious investment activity.
What the IMF, IEA and World Bank say about the breadth of risk
The IMF’s warning gains additional weight when compared with the assessments of other major international institutions. In recent days the IEA has stressed that disruptions to flows through the Strait of Hormuz and damage to energy infrastructure have major consequences for energy security and affordability. Back in January, in its report on global economic prospects, the World Bank warned that heightened geopolitical tensions and the escalation of conflict in the Middle East could disrupt trade and commodity markets and harm growth. In its regional overview for the Middle East and North Africa, the Bank further pointed out that the intensification of armed conflicts and increased uncertainty are among the main negative risks for the region.
That does not mean that all institutions expect the same outcome or the same depth of impact. For now the IMF is avoiding specifying what the final economic cost of the current conflict will be because, according to Fund officials, it depends above all on the duration of the crisis, the extent of damage to infrastructure and whether the increase in energy prices will be short-lived or persistent. That uncertainty explains why the rhetoric of international institutions is at the same time cautious and alarming. No one is yet claiming that a global breakage scenario is certain, but more and more relevant actors are warning that the room for an unpleasant surprise has increased significantly.
Why markets and central banks listen to such warnings
When the IMF sends the message that war and energy disruptions could seriously test the resilience of the world economy, that message does not remain only within the framework of economic analysis. It immediately affects market expectations, especially expectations about interest rates, inflation and currency movements. Central banks must assess whether this is a temporary price jump or a shock that can have so-called second-round effects, meaning it can spill over permanently into wages, services and the broader consumer price index. If they judge that the risk is more lasting, they will be more cautious about easing monetary policy, even when the economy shows signs of slowing.
This is politically and socially important because high interest rates do not remain an abstract category. They determine the price of housing and business loans, companies’ investment decisions, the value of public debt and the dynamics of employment. If the energy shock turns into a longer inflationary wave, the consequences are felt by households through bills, fuel and food, and by governments through more expensive borrowing and weaker fiscal room for maneuver. In that sense, the IMF’s warning is not only a comment about oil, but a warning that geopolitical risk can very quickly become a social and political problem far wider than the region from which it originated.
What follows if the crisis is prolonged
The most unfavorable scenario for the world economy is not necessarily a one-off price jump, but a prolonged combination of more expensive energy, weaker growth and stubborn inflation. Economists describe such a combination as stagflationary pressure, and that is exactly what markets and monetary authorities fear the most. If disruptions through the Strait of Hormuz and regional energy infrastructure were to last, the pressure would not remain limited to the price of crude oil. Transport, industrial production, part of the food chain and also financing costs would become more expensive, because investors would seek higher returns for greater risk. Central banks would then be forced to balance between two bad choices: not reacting enough to inflation or additionally slowing the economy.
On the other hand, a faster calming of the conflict and the restoration of normal flows of energy and maritime transport could limit the damage to a short-lived shock of sentiment and prices. In that case the global economy could retain its current framework of moderate growth, and the IMF’s warnings would remain above all a reminder of how fragile the recovery still is. But according to the available information, the duration of the crisis is precisely the key unknown. That is why international institutions, markets and governments are at this moment not discussing only wartime events, but whether the world will once again find itself in a situation in which a geopolitical conflict changes monetary plans, investment decisions and the expectations of millions of consumers in just a few days.
That is precisely why the IMF’s message goes beyond daily market nervousness. It reminds us that the global economy may no longer be as fragile as it was in the first phases of the pandemic or during the energy shock of 2022, but it is still deeply connected to supply bottlenecks, political crises and energy prices. In such a world, a new shock does not have to look the same as the previous one to be serious. It is enough that it hits the right place at the right time, and the Middle East, given its role in energy, trade and market confidence, remains precisely one of those places.
Sources:- IMF – official statement on developments in the Middle East, trade disruptions, rising energy prices and market volatility (link)- IMF – Kristalina Georgieva’s speech in Bangkok on March 5, 2026, on the resilience of the world economy and new shocks (link)- IMF – speech of March 9, 2026, on energy security, growth, inflation and new demands facing policymakers (link)- IMF – World Economic Outlook update from January 2025 with a projection of global growth of 3.3 percent in 2025 and 2026 and a warning about downside risks (link)- IEA – overview of the impact of the war in the Middle East on global energy markets and flows through the Strait of Hormuz (link)- IEA – overview of the strategic importance of the Strait of Hormuz for global oil and LNG supply (link)- World Bank – Global Economic Prospects, January 2025, assessment of the risks that geopolitical tensions and conflicts pose to trade, commodity markets and growth (link)- OPEC – decision of March 1, 2026, on production policy and the assessment of market conditions at that time (link)- Reuters / available reports – reports on the impact of the conflict on the price of oil, market expectations and central banks in March 2026 (link)
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