Terrifying! Middle East War Effects Disrupt the World, This is the IMF Analysis
The current conflict in the Middle East, sparked by US and Israeli attacks on Iran at the end of February 2026, has disrupted global economic activities and holds the potential for further worsening.
The International Monetary Fund (IMF) warns that every armed conflict erupts with immediate effects that shake the lives and livelihoods of local populations. However, the impacts can spread more widely through various spillover risks.
“We have seen significant disruptions,” said IMF Communications Department Director Julie Kozack during a press conference, quoted on Thursday (26/3/2026).
As the Middle East is one of the world’s major oil and gas producers, the biggest spillover effects will impact energy commodity prices. Moreover, the region serves as a primary route for global crude oil and gas supplies, namely the Strait of Hormuz.
Should the Strait of Hormuz be closed due to the Iran-US-Israel warfare, the IMF notes that it would immediately cut access to around 20% of the world’s oil and LNG supplies transported by sea.
“Energy infrastructure in the Gulf region and Iran has been damaged, disrupting oil and gas production,” Kozack stated.
Beyond that, she mentioned that there are at least three main channels through which the Middle East conflict directly affects the broader global economy, from the national level to regional and global scales. These spillover risk channels are the IMF’s primary focus.
The first risk channel is through commodity price volatility. The impact on commodity prices will depend on how long the Strait of Hormuz remains closed and the extent of damage to hydrocarbon production facilities in the region.
Kozack noted that oil and gas prices have risen more than 50% in the past month, exceeding US$100 per barrel. Additionally, fertiliser shipments have been disrupted.
This, combined with transportation disruptions, increases the risk of food price hikes. These increases could be substantial, depending on the duration and intensity,” Kozack said.
For each country and region, she assessed that the specific impacts from rising commodity prices will heavily depend on each country’s conditions.
The second risk channel is shocks to inflation pressures and inflation expectations. If prolonged, higher energy prices will push headline inflation higher.
“And what we and central banks will monitor closely is whether there will be second-round effects on broader inflation, and very importantly, the impact on inflation expectations. This is another channel that can affect the global economy as a whole,” she explained.
Historically, Kozack said that looking at energy price shocks, there is a general pattern where every 10% increase in oil prices over a year can raise global inflation by around 40 basis points and reduce global output by between 0.1 and 0.2%.
“Once again, this is a rule of thumb and applies to persistent oil price increases,” she emphasised.
Finally, the third spillover risk channel is financial conditions. Kozack stated that reactions have been observed in global markets to the war, from declining global stock prices to rising bond yields in various countries, including advanced economies such as the United States, the United Kingdom, and Europe, as well as in emerging markets.
“Volatility has increased. The US dollar has strengthened, while the currencies of several emerging market countries have weakened. This is the current picture and the impact channels,” she remarked.
Nevertheless, she stressed that the overall impact of the warfare ignited by US President Donald Trump will greatly depend on the duration and intensity of the conflict.
“We will provide the latest assessment in the World Economic Outlook report in April, which will include a comprehensive analysis at both the country and global and regional levels,” she stated.