The International Monetary Fund (IMF) has issued a warning about the economic consequences of surging oil prices, stating that sustained energy cost increases could drive global inflation upward by 40 basis points.
Managing Director Kristalina Georgieva gave the warning in a Bloomberg interview on Saturday amid escalating military conflict between the United States and Iran that threatens critical oil supply routes in the Middle East.
The crisis has heightened fears of supply disruptions in a region responsible for roughly one-third of global oil production.
Georgieva explained that based on prior experience, a 10 per cent increase in energy prices sustained for one year would push inflation up by 40 basis points while economic growth would simultaneously slow by between 0.1 and 0.2 per cent.
She urged policymakers worldwide to brace for these ripple effects and implement careful policy responses to protect economic stability as geopolitical uncertainty mounts.
The IMF chief also highlighted risks to emerging market currencies, noting that several are already experiencing depreciation pressures due to rising energy costs and broader uncertainty.
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Global oil prices have surged dramatically in recent weeks, with Brent crude exceeding $92 per barrel on Friday and extending weekly gains to over 27 per cent.
The Middle East hosts crucial oil shipping routes including the Strait of Hormuz, through which approximately one-fifth of global oil supply passes daily.
Market participants warn that energy markets have grown too complacent about prolonged closure risks, noting that without de-escalation, prices could reach $100 per barrel within days.
Iran has launched missile attacks on energy facilities in the United Arab Emirates, Saudi Arabia, and Qatar, actions expected to lead to further tightening of global supplies.
Major financial institutions, including JPMorgan and Goldman Sachs, predict prices could exceed $100 and potentially reach $150 by summer if the Strait remains blocked for several weeks.
