Tuesday, 31 March 2026
A report by economists at the International Monetary Fund (IMF) indicates that the recent conflict involving Iran is adding pressure to the global economic outlook, particularly for countries already recovering from earlier disruptions. The analysis describes the situation as a global but uneven shock, with differing impacts depending on countries’ economic structures, exposure to energy imports and available financial buffers.
The IMF notes that the most immediate effects are being transmitted through energy markets. Disruptions linked to the closure of the Strait of Hormuz and damage to regional infrastructure have affected global supply, contributing to a sharp increase in oil prices in March. The Strait typically handles around 25 to 30 percent of global oil flows and about 20 percent of liquefied natural gas, making it a critical route for global energy trade. According to the IMF, this represents one of the most significant disruptions to oil markets in recent decades.
The impact is uneven across regions. Energy-importing economies in Europe and Asia are facing higher fuel and production costs, while some countries in Africa and Asia are encountering difficulties securing supplies even at elevated prices. In contrast, certain energy-exporting economies may benefit from higher prices, although gains depend on their ability to maintain export volumes.
Beyond energy, the conflict is also affecting global supply chains. Rerouting of shipping traffic has increased transport and insurance costs and extended delivery times. Disruptions to the trade of key inputs, including fertilisers and industrial materials, are adding further pressure. Around one-third of global fertiliser shipments typically pass through the Strait of Hormuz, and interruptions to these flows are raising concerns about agricultural production and food prices, particularly as the planting season begins in parts of the Northern Hemisphere.
The IMF highlights that low-income countries are particularly exposed to these developments. Higher food and fertiliser costs risk reducing access to basic goods, while tighter financial conditions and declining levels of international assistance may limit their ability to respond. In these economies, food accounts for a significantly larger share of household spending, increasing vulnerability to price increases.
The report also points to inflation as a key transmission channel. Sustained increases in energy and food prices are likely to push consumer prices higher globally. Historically, prolonged periods of elevated oil prices have been associated with higher inflation and slower economic growth. The IMF warns that this could also affect inflation expectations, potentially feeding into wage and price-setting behaviour and making it more difficult for policymakers to stabilise prices without slowing economic activity.
Financial markets have also reacted to the conflict. According to the IMF, global equity prices have declined, bond yields have risen and market volatility has increased, contributing to tighter financial conditions. These effects are more pronounced in emerging markets and lower-income economies, where higher borrowing costs and weaker currencies may increase debt burdens and complicate refinancing.
The IMF emphasises that the overall economic impact will depend on the duration and scale of the conflict, as well as the extent of disruption to infrastructure and supply chains. A shorter conflict could lead to temporary price spikes, while a prolonged period of instability may keep energy prices elevated and sustain pressure on inflation and growth.
The institution has called on governments to adopt targeted and country-specific policy responses, particularly in economies with limited fiscal space or foreign exchange reserves. It also stated that it stands ready to provide policy advice, capacity support and financial assistance where needed, in coordination with international partners.
Source: IMF
