The IMF has warned that the Middle East tensions could lead to higher oil prices, an increase in inflation, and significantly impact on financial markets’ positive outlook.
The IMF is closely monitoring recent events in the region following Iran’s missile strike on Israel, emphasising the possibility of a war between the two countries leading to higher interest rates, reports The Guardian.
On 1 April, an Iranian military commander, Major General Mohammad Reza Zahedi, was killed in Damascus in a suspected Israeli strike. In retaliation, Iran carried out a series of missile and drone attacks.
The IMF’s economic counsellor, Pierre-Olivier Gourinchas, said the IMF is assessing the likelihood of another surge in oil prices resulting from past conflicts in the Middle East.
Gourinchas said: “The increased inflation that would come from higher energy prices would trigger a response from central banks that would tighten interest rates to secure inflation coming back to target, and that would weigh down on activity.”
According to Gourinchas, if oil prices increase by 15% and shipping costs rise due to an uncontained conflict, it would cause a 0.7% surge in inflation and negatively impact business confidence and investment.
Bd-pratidin English/Lutful Hoque
