Ahmed Kamel – Egypt Daily News
A deepening energy shock triggered by the Middle East conflict is pushing the global economy toward a dangerous tipping point, with the International Monetary Fund warning that prolonged disruption could ignite a new wave of inflation and stall growth worldwide.
Behind closed doors at the Spring Meetings in Washington, concern has shifted from whether the war will impact the global economy to how severe the fallout could become, especially if tensions choke vital oil routes through the Strait of Hormuz.
At the center of those fears is oil.
Prices have already surged on the back of escalating tensions, but policymakers are increasingly focused on what happens if crude remains elevated for months, not weeks.
Pierre-Olivier Gourinchas said recent market reactions are a warning signal, not a peak, indicating that the global economy may already be drifting toward a more dangerous path.
The IMF is now modeling a scenario where oil climbs beyond $100 per barrel and keeps rising, potentially reaching $125 within two years. In that environment, borrowing costs would remain higher for longer, inflation would accelerate again, and global growth could slow to levels typically associated with recession.
The concern is not just higher prices—it is persistence.
A short-lived spike can be absorbed. A prolonged shock cannot.
Under the IMF’s internal projections, a drawn-out conflict would force central banks to delay or reverse interest rate cuts, tightening financial conditions just as economies begin to weaken. The result is a synchronized slowdown across major markets.
Kristalina Georgieva has made it clear that time is now the defining factor.
A quick end to the conflict could allow markets to stabilize and inflation to ease again. But if the war extends into the summer, the economic damage will compound, particularly for countries already struggling with high debt and import costs.
Europe appears especially exposed. Still recovering from the energy shock triggered by the Ukraine war, the region now faces renewed pressure that could drag growth close to stagnation.
The United States is expected to remain more resilient in the short term, supported by domestic demand and continued investment in artificial intelligence infrastructure. But even there, higher energy costs threaten to erode momentum.
For emerging economies, the risks are sharper.
Many depend heavily on imported fuel, meaning every sustained increase in oil prices feeds directly into inflation, currency pressure, and fiscal strain. Growth across these markets is already expected to weaken, with some regions facing far steeper slowdowns.
Nowhere is the impact more immediate than in the Middle East itself.
Beyond the human and political cost, the conflict is beginning to ripple through infrastructure, trade flows, and export capacity, factors that could suppress growth across the region even if oil revenues rise.
At the same time, global institutions are preparing for a financial response.
World Bank President Ajay Banga said the bank is working on a funding package that could reach up to $100 billion to support the most affected economies, signaling expectations that the crisis may not be short-lived.
Even in the most optimistic scenario, officials acknowledge that energy markets will not reset overnight.
The deeper risk now is that a geopolitical conflict evolves into a full-scale economic shock, one that hits growth, prices, and financial stability at the same time.
