'Situation highly fluid, too early to assess economic impact': IMF after Iran shuts Hormuz

The International Monetary Fund (IMF) said on Tuesday it is too early to assess the economic consequences of the escalating war involving Iran, warning that disruptions to trade, surging energy prices, and financial market volatility are adding to global uncertainty.

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"We are closely monitoring developments in the Middle East. So far, we have observed disruptions to trade and economic activity, surges in energy prices, and volatility in financial markets," the IMF said in a statement.

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"The situation remains highly fluid and adds to an already uncertain global economic environment. It is too early to assess the economic impact on the region and the global economy. That impact will depend on the extent and duration of the conflict," the global agency said. 

Also read: Strait of Hormuz closed: For India, exim trade, oil imports remain a key worry

The conflict entered its fourth day on Tuesday. Iran announced the closure of the Strait of Hormuz, a key shipping route for global energy supplies. An Iranian Revolutionary Guards senior official said on Monday that the Strait of Hormuz is closed and Iran will fire on any ship trying to pass.

"The strait (of Hormuz) is closed. If anyone tries to pass, the heroes of the Revolutionary Guards and the regular navy will set those ships ablaze," said Ebrahim Jabari, a senior adviser to the Guards commander-in-chief.

The Strait is the world's most vital oil export route, connecting major Gulf producers such as Saudi Arabia, Iran, Iraq, and the United Arab Emirates with the Gulf of Oman and the Arabian Sea. 

Reuters reported global oil and gas prices jumped on Tuesday as the US-Israeli war on Iran halted exports from parts of the Middle East. Tehran attacked ships and energy facilities, closing navigation in the Gulf and forcing production stoppages from Qatar to Iraq.

Oil prices have risen more than 15% since Friday. The benchmark Brent crude contract gained 6% on Tuesday to above $82 per barrel, the highest level since July 2024. European gas prices have surged 40%, adding to a 40% increase on Monday. Prices for sugar, fertiliser, and soy have also climbed.

The Middle East accounts for just under a third of global oil production and almost a fifth of natural gas output.

Traffic through the Strait of Hormuz remained halted for a fourth day after Iran attacked five ships, choking off a route that handles about 20% of global oil and gas supply.

On Tuesday, a fuel tank at Oman's Duqm commercial port was hit, and a fire broke out at the United Arab Emirates' Fujairah oil hub. On Monday, Qatar shut down its liquefied natural gas facilities, which supply around 20% of global LNG exports. Saudi Arabia suspended production at its largest domestic refinery, while Israel and Iraq’s Kurdistan region also halted parts of their gas and oil output.

(With inputs from Reuters)