The war in Iran weighs on the global economy at the opening of the IMF meetings

The concern over the impact of the war in Iran on the global economy deepened on Monday, as new countries announced emergency support measures to counter the surge in energy costs, while others issued a call for international aid.

The conflict – the third major shock to hit the global economy following the COVID pandemic and the invasion of Ukraine by Russia – will dominate discussions among financial officials gathering this week at the International Monetary Fund in Washington.

Any lingering hope of a quick recovery in oil shipments through the Strait of Hormuz, a key chokepoint, was dashed after the failure of talks between the United States and Iran over the weekend, further compromising an already fragile ceasefire.

The IMF and World Bank have already indicated that they will downwardly revise their global growth forecasts and increase their inflation projections due to the war, with emerging markets and developing countries being hit the hardest.

Nigeria stated on Monday that it would require increased international support to deal with fuel costs domestically, even as the rise in oil prices boosted revenues for Africa’s leading oil producer.

“This shock comes at a critical juncture, intensifying inflationary pressures and raising the cost of living for households,” said Finance Minister Wale Edun in a statement preceding this week’s meetings in Washington.

Local gasoline prices have surged over 50% and diesel prices over 70% since the start of the conflict, Mr. Edun noted, adding that this shock threatened to derail efforts launched in 2023 to stabilize the economy and reignite growth.

New countries announce support measures in response to the magnitude of the shock

Few countries are immune to the repercussions of the halt in energy supplies through the strait since the war broke out on February 28, causing the worst disruption to global supply chains ever recorded. Dozens of governments have already taken measures to conserve energy or support consumers.

The German coalition government, which initially resisted calls for support, announced on Monday that it had agreed to cut fuel prices for consumers and businesses by €1.6 billion (US $1.9 billion) through reductions in diesel and gasoline taxes.

“This war is the real cause of the problems we are currently facing in our country as well,” Chancellor Friedrich Merz said during a press conference.

(Context: The article discusses how various countries are responding to the economic impact of the war in Iran, which has disrupted global energy supplies and caused ripple effects throughout the world. Fact Check: The statements attributed to government ministers and officials are accurately reported in the article.)