Mideast Conflict Threatens Global Economic Slowdown

The International Monetary Fund (IMF) said on Monday that the ongoing Middle East conflict is likely to push global prices higher and weigh on economic growth. The Washington-based institution linked the risk to rising energy and food costs, saying disruptions affecting oil, gas, and fertilizer flows from the Gulf could hit economies broadly and may leave longer-lasting damage.

The IMF set out its assessment in a blog post written by senior department leaders, including Chief Economist Pierre-Olivier Gourinchas. The post said a conflict that drags on would be more likely to keep energy prices elevated for longer, creating particular pressure for countries that depend heavily on imports. The IMF also noted that, in past episodes, sustained jumps in oil prices have been associated with higher inflation and weaker growth.

Beyond energy, the IMF highlighted food as a key channel through which the conflict could affect households and governments. It said global food prices could rise by 15% to 20% by the first half of 2026 if the crisis persists. The blog post tied part of that risk to fertilizer supply, noting that about one-third of fertilizer production transits the Strait of Hormuz, a chokepoint that can amplify disruptions when shipping conditions deteriorate.

The IMF also pointed to signs of stress already visible in markets. It said natural gas prices in the UK have more than doubled since December, and that Brent crude prices have risen significantly. In Europe, governments are weighing higher subsidies as they prepare for what they expect could be sharp increases in gas and electricity costs over the coming winter.

What it means for policy and markets is that the IMF sees limited room for maneuver in some places if the shock persists. The blog post said governments with high borrowing levels could face constraints in accessing the funds needed to cushion households and businesses.

That combination—higher import bills, pressure on public finances, and elevated inflation risks—can complicate decisions on subsidies and other support measures, particularly for countries that rely on external energy and food supplies.

Key uncertainties remain tied to how long the conflict lasts and how severe the supply disruptions become. The IMF’s warning focused on the possibility of prolonged strain on oil, gas, and fertilizer supply routes from the Gulf, and on how those pressures could feed through to inflation and growth outcomes worldwide.