IMF warns prolonged Middle East conflict risks global stability

International Monetary Fund Managing Director Kristalina Georgieva has cautioned that the escalating conflict in the Middle East could undermine global economic stability if it becomes prolonged, flagging risks to energy markets, inflation trends and investor sentiment.

Addressing delegates at the Asia in 2050 Conference in Bangkok this morning, Georgieva said an extended war would likely transmit shocks across economies by lifting energy prices and clouding growth prospects. At a time when many countries are still navigating fragile recoveries and tight financial conditions, she warned, policymakers could face renewed strain.

“If this conflict proves more protracted, it has clear potential to affect global energy prices, market confidence, growth and inflation,” she said, adding that governments and central banks may be forced to respond to fresh pressures.

The IMF, she noted, is closely tracking developments and evaluating their broader macroeconomic consequences. These assessments will feed into the Fund’s next World Economic Outlook, due in April.

Market anxiety has already intensified. Heightened tensions have disrupted some travel routes and oil flows through the Strait of Hormuz, a critical artery for global crude shipments. Brent crude prices climbed above $85 a barrel for the first time since June 2024, while European natural gas prices surged past €65 per megawatt hour at the Dutch TTF hub. The spike in energy costs has revived concerns about stickier inflation and slower global expansion.

Georgieva observed that the world economy is moving into an era defined by recurring and often unpredictable shocks, from geopolitical flare-ups and trade fragmentation to rapid technological shifts. While the precise trigger of the next disruption may be unknown, she said resilience and preparedness must remain constant priorities.

Turning to Asia, Georgieva acknowledged that the region has significantly strengthened its financial architecture and policy frameworks since the 1997–98 Asian financial crisis, bolstering investor confidence and stability. Yet she urged governments not to be complacent, warning that rising geopolitical uncertainty demands continued vigilance.

She encouraged Asian economies to deepen regional integration and lower non-tariff trade barriers to cushion against external volatility. Financial markets have already reflected the strain, with technology-heavy indices in South Korea and Taiwan facing sharp foreign outflows.

“The sooner this calamity ends, the better it will be for the global economy,” Georgieva said.