IMF Chief Sounds Alarm: US-Iran Spat a Threat to Global Growth

Kristalina Georgieva, the managing director of the International Monetary Fund, has issued a dire warning regarding the potential economic fallout from ongoing US-Iran tensions. She informed Bloomberg TV that the IMF is keenly observing energy prices, cautioning that any significant increase in oil costs, potentially triggered by US strikes on Iran, could have detrimental “secondary and tertiary impacts” across the global economy. This ripple effect, she explained, could lead to a downgrade in global growth prospects, particularly affecting large economies.
The immediate trigger for these concerns is the Iranian parliament’s recent vote to potentially close the Strait of Hormuz, a vital shipping lane responsible for a fifth of the world’s oil consumption. This move is a direct response to a US attack and threatens to create an oil supply shock, driving up inflation and hindering economic expansion. While some analysts, like Berenberg Bank’s Holger Schmieding, deem a full disruption unlikely, the mere possibility underscores the precariousness of the situation.
Oil markets reacted with initial volatility, seeing prices jump over 5% on Sunday before paring back gains on Monday. Brent crude, after reaching a five-month high, settled near $76 a barrel. However, a worst-case scenario outlined by Goldman Sachs suggests oil could reach $110 a barrel if flows through Hormuz are significantly curtailed for an extended period, highlighting the potential for extreme price spikes.
Against this backdrop, US Secretary of State Marco Rubio has forcefully declared that shutting the strait would be “economic suicide” for Iran and has urged China to intervene given its substantial reliance on Hormuz for oil. Adding to the complex picture, RBC Capital Markets analysts have warned of potential “energy attacks” from Iranian-backed militias and advised against premature optimism, suggesting the conflict remains in a volatile “unknown knowns” phase, as exemplified by the reported U-turn of two supertankers in the strait.