The International Monetary Fund once again sounds the alarm. As tensions in the Middle East continue to disrupt energy markets and global trade, the institution believes the global economy is gradually approaching a more bleak scenario marked by slowing growth and persistent inflation.
The conflict and its impact on energy flows are particularly worrying international economists now fear lasting repercussions on the global economy as a whole.
In its latest forecasts released last month, the IMF was already forecasting limited global growth of 3.1% this year.
It pointed out the consequences of the conflict in the Middle East and the disruptions caused in the Gulf, where a large part of the world’s oil and gas exports transit.
The partial blockade of energy flows has led to a sharp rise in oil prices in recent weeks, fueling inflationary tensions in many countries.
For the IMF, the main risk now is a durable conflict capable of further aggravating global economic imbalances.
The IMF spokesperson, Julie Kozack, admitted on Thursday that the global economy seems to be gradually heading towards the most pessimistic scenario envisaged by the institution.
The IMF, however, remains cautious in its analysis. According to the organization, financial markets remain relatively stable for now and inflation expectations are still under control.
But this situation could evolve quickly if energy tensions persist in the coming months.
The main concern of central banks and economists now revolves around the evolution of inflation expectations.
When households, businesses, and investors begin to anticipate a sustained rise in prices, their behaviors change. Companies may raise their prices as a precaution, employees may demand salary increases, and consumers may accelerate certain purchases.
This mechanism can then perpetuate inflation and make it much more difficult to return to a stable situation.
Energy prices play a central role in this dynamic. The rise in oil gradually impacts transportation, industry, food, and production costs.
This situation greatly complicates the task of central banks, which have been facing high inflation for several years.
If prices rise sustainably, major monetary institutions could be forced to maintain higher interest rates for longer than expected.
Such a scenario could directly impact investment, consumption, and hence global growth.
The markets are now closely monitoring the next decisions of the U.S. Federal Reserve, the European Central Bank, and other major central banks.
The IMF reminds us that the global economy remains fragile despite some resilience observed in recent months.
After the pandemic, energy crises, trade tensions, and the return of inflation, several countries are already experiencing marked economic slowdowns.
The escalation of the conflict in the Middle East could thus become a major new shock for a still recovering global economy.
The International Monetary Fund is expected to update its global economic forecasts in July.
These new estimates will allow for a more precise measurement of the impact of geopolitical tensions on growth, inflation, and financial markets.
Until then, the evolution of the situation in the Middle East will remain one of the main factors monitored by economists and investors around the world.
