The head of the International Monetary Fund has warned that rising tensions in West Asia could push up global inflation if the conflict leads to a sustained increase in oil prices.
Kristalina Georgieva, Managing Director of the International Monetary Fund, said the ongoing crisis in the region is already creating uncertainty in energy markets and could have wider economic consequences. Speaking at an international symposium hosted by Japan’s finance ministry in Tokyo, she urged policymakers to prepare for unexpected developments.
Georgieva cautioned governments and central banks to “think of the unthinkable” as geopolitical tensions remain unpredictable. She said policymakers should remain vigilant and be ready to respond quickly if the situation worsens.
According to the IMF chief, a sharp rise in oil prices could translate into higher inflation globally. She noted that if oil prices increase by about 10 per cent and remain elevated for a prolonged period, it could add roughly 0.4 percentage points to global inflation.
Energy markets have been particularly sensitive to developments in West Asia because the region plays a crucial role in global oil supply. Any disruption to production or shipping routes could quickly affect energy prices worldwide.
One key concern for markets is the Strait of Hormuz, through which a significant portion of the world’s oil shipments pass. Any disruption along this route could lead to further volatility in global energy markets.
Georgieva said the global economy has shown resilience in recent years despite multiple shocks, including the pandemic and geopolitical conflicts. However, she warned that prolonged instability in West Asia could once again challenge economic recovery and complicate efforts to control inflation.
She added that governments and financial institutions should continue monitoring the situation closely and prepare policy responses if needed.
The IMF is currently assessing the possible economic impact of the conflict on different countries. Georgieva said the organisation will provide a clearer analysis in its upcoming global economic assessments, which will examine how the crisis could influence growth, inflation and financial stability in the months ahead.