The escalating Gulf conflict is rapidly reshaping the global economic outlook, with mounting evidence that the shock is no longer a short-term disruption but a structural threat to growth, inflation and trade flows both regionally and worldwide.
International Monetary Fund Managing Director Kristalina Georgieva has delivered one of the starkest warnings yet, cautioning that the global economy faces a “much worse outcome” if the war drags into 2027, particularly if oil prices climb to around $125 a barrel.
She noted that the IMF’s earlier “reference scenario” of limited economic impact is now “in the rear-view mirror”, with the world already shifting into a more adverse trajectory of slower growth and rising inflation.
In the near term, the conflict is transmitting through three powerful channels: oil, trade and confidence.
Crude prices have surged above $110 a barrel amid disruptions in the Strait of Hormuz, through which roughly 20 per cent of global oil supply flows. Chevron CEO Mike Wirth warned that prolonged closure of the strait would trigger “physical shortages” of oil globally, with Asia likely to be the first region to feel the impact as supply tightens and demand adjusts.
The inflationary impulse is already building. Georgieva highlighted that fertiliser prices have jumped 30-40 per cent, with food prices expected to rise by 3-6 per cent an early signal of second-round effects spreading beyond energy markets.