IMF Warns Iran War Oil Price Spike Could Hit Growth, Spur Inflation (Full Interview)

A 10% increase in energy prices that persists for a year would push global inflation up by 40 basis points and slow economic growth by 0.1-0.2%, International Monetary Fund Managing Director Kristalina Georgieva said.

“The world economy has been remarkably resilient. Shock after shock, and yet growth is at 3.3%,” Georgieva told Bloomberg Television’s Haslinda Amin in an interview on the sidelines of the IMF’s “Asia in 2050” conference in Bangkok. “But this resilience is being tested yet again.”

Georgieva warned that many countries are facing the latest Middle East crisis with “depleted buffers” after previous shocks, though she noted that many Asian economies have built stronger fiscal capacity and reserves over the past two decades. The IMF is already in discussions with some members about potential balance of payment assistance should the uncertainty deepen.

The fund currently has programs with 50 countries and stands ready to augment existing arrangements or create new ones if needed, Georgieva said on Friday. She expressed particular concern for oil-importing nations, Pacific Island economies that sit “at the end of the supply chain,” and low-income countries with high debt levels. - US oil futures surged above $92 a barrel for the first time since September 2023 as the war in Iran upends critical energy market flows, with shipping through the Strait of Hormuz at a near-total halt.

West Texas Intermediate added more than 13% and was on track for the biggest weekly percentage gain in at least two decades. Global benchmark Brent surged more than 9% to trade above $93 a barrel. Iran said Friday that the European Union is a “legitimate” target if it joins the war, adding to bullish momentum.

The Wall Street Journal reported that Kuwait has begun cutting production at some oil fields after running out of places to store bottled-up crude, the latest sign of a hit to supply in the region. Citigroup Inc. estimates that the crude oil market is losing 7 million to 11 million barrels a day of supply due to the disruption through Hormuz.

Crude surged even after US President Donald Trump signaled “imminent action” to reduce pressure on prices, while National Economic Council Director Kevin Hassett denied that the White House would tap the Strategic Petroleum Reserve, a cache of crude held in vast underground caverns, anytime soon. The Treasury Department eased curbs on India’s ability to buy Russian oil.

“We’ve got a whole flow chart of tools to use,” Hassett told Bloomberg in a television interview.

Japan was also reportedly considering tapping reserves. No action has yet been taken, though market participants are speculating that a coordinated release from multiple nations’ emergency oil inventories could be enacted to maximize impact.

With no sign of a let-up in hostilities, Goldman Sachs Group Inc. flagged the risk of scenarios for oil topping $100 a barrel in the case of prolonged disruption. European diesel futures headed for a weekly gain of more than 50%, and central banks signaled their unease about a possible resurgence in inflation.

There has been a “near-total” pause in commercial traffic through Hormuz, according to the Joint Maritime Information Center, a multinational naval advisory group. The collapse stems from “security threats, insurance constraints, operational uncertainty and effective disruptions,” it said.

Oil markets have been rocked by the conflict, which has ensnared about a dozen nations since the US and Israel launched their campaign on Feb. 28. As the hostilities have flared, shipping through the key strait has all but ended, choking off oil supplies to global markets and prompting producers to start shutting-in output. Refineries and tankers have also been hit.

Qatar’s energy minister told the Financial Times that crude could soar to $150 a barrel in two to three weeks if tankers and other merchant vessels were unable to pass through Hormuz.

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