image sourced from original article at The head of the International Monetary Fund, Kristalina Georgieva, warned that the global economy could face a far more severe downturn if the war in the Middle East continues into 2027 and oil prices rise to about $125 per barrel. She said inflation is already increasing and that the institution’s earlier assumption of a short conflict and only a mild slowdown in growth is no longer realistic.
Under a more adverse outlook, global growth could slow sharply while inflation accelerates. Georgieva cautioned that if the conflict persists and energy prices climb further, inflation expectations could become unanchored, worsening financial conditions and increasing the risk of a deeper economic slump.
Energy industry leaders also warned of physical oil supply shortages due to the closure of the Strait of Hormuz, a critical route for global crude shipments. Rising fertilizer costs and disrupted supply chains are expected to push food prices higher, adding to inflationary pressures. Georgieva stressed that policymakers must avoid measures that sustain high energy demand while supply remains constrained, calling the situation 'really serious.'
