Global economy is going to be shaken by Middle East tension, big alert from IMF amid Iran war

New Delhi, 31 March. The International Monetary Fund (IMF) has said that the ongoing war between the US, Israel and Iran could affect the global economy in many ways, but its outcome would be the same—inflation would rise and economic growth would slow. According to the IMF, this ongoing war in the Middle East is not only affecting the lives and livelihoods of the people there, but has also become a cause of concern for many economies of the world, which were already trying to recover from previous economic challenges. The IMF said that this crisis is affecting the entire world, but its impact is not equal on all countries. Energy importing countries are being affected more, poor countries are under more pressure and countries with less economic reserves are in more trouble.

Major energy importing countries in Asia and Europe are being most affected by rising fuel and other input costs. About 25-30 percent of the world’s oil and 20 percent of LNG is supplied through the Strait of Hormuz, which meets the needs of Asia and Europe. The IMF said that many countries in Africa and Asia, which depend on oil imports, are now finding it difficult to get adequate supplies despite the increased prices.

The organization warned that rising food and fertilizer prices are creating additional pressure in many parts of the Middle East, Africa, Asia-Pacific and Latin America. Especially in poor countries, the risk of food crisis may increase and they may need external help.

According to the IMF, if this war remains short, oil and gas prices may rise suddenly, but if it continues for a long time, energy prices will remain high, which may worsen the condition of import-dependent countries. In the big manufacturing countries of Asia, rising prices of fuel and electricity are increasing production costs and affecting the purchasing power of people. There is also pressure on the balance of payments in some countries, due to which their currency is weakening.

This crisis in Europe can create a situation like the gas crisis of 2021-22. Countries such as Italy and the United Kingdom (UK) may be more affected, while countries such as France and Spain are relatively safe due to their nuclear and renewable energy capacity. This war is affecting not only the energy sector but also other essential supply chains. Due to changes in ship routes, transport and insurance costs are increasing and goods are getting delayed. The IMF also noted that the Gulf region supplies the world’s largest supply of helium, which is used in semiconductors and medical equipment. At the same time, Indonesia may face shortage of sulfur needed to process nickel.

East African countries that depend on the Gulf for trade and remittances may also face the impact of weak demand, logistics problems and reduced remittances.

The IMF warned that if energy and food prices remain high for a long time, it will lead to inflation around the world. Furthermore, this war has also affected the financial markets. Global stock markets have fallen, bond yields have risen, and market volatility has increased. Although the decline so far has been limited compared to previous major global crises, it has tightened financial conditions. IMF said that countries will have to adopt right policies to deal with this situation. Countries which have less resources need to be especially cautious. “In an uncertain world, more countries need our support, and we stand with them,” said IMF Managing Director Kristalina Georgieva.