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MF warns Iran war will raise prices and slow global growth
A report led by chief economist Pierre-Olivier Gourinchas outlines risks from energy shocks and limited fiscal space
IMF warns Iran war will raise prices and slow global growth, as the Fund cautions that continued conflict in the Middle East and restrictions on exports of oil, gas, and fertilizers could weigh heavily on the global economy.
In a report published on the IMF blog and signed, among others, by chief economist Pierre-Olivier Gourinchas, the institution highlights the risk of rising prices and weakening economic momentum worldwide. Governments with high levels of debt, the report notes, will face limited access to the resources needed to cushion the impact of the crisis.
“In Europe, the shock is bringing back the specter of the 2021–22 gas crisis,” the analysis states, pointing to countries such as Italy and the United Kingdom as particularly exposed due to their reliance on gas-fired electricity. France and Spain, by contrast, are described as relatively protected thanks to stronger nuclear capacity and renewable energy sources.
“While the war may affect the global economy in different ways, all paths lead to higher prices and slower growth,” the report emphasizes. A short-lived conflict could trigger sharp spikes in oil and gas prices before markets adjust, while a prolonged war risks keeping energy costs elevated and placing sustained pressure on import-dependent economies.
The outcome, the IMF adds, will depend largely on the duration and scope of the conflict, as well as the extent of damage to infrastructure and supply chains. Historically, prolonged surges in oil prices have tended to drive inflation higher while weighing on economic growth.
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