Gulf war risks global stagflation as oil shock ripples worldwide
The escalating Gulf conflict is reshaping the global economic outlook, with the International Monetary Fund warning of a 'much worse outcome' if the war drags into 2027. Crude prices have surged above $110 a barrel amid disruptions in the Strait of Hormuz, with inflationary impulses building and supply chains fragmenting.
The Gulf conflict is rapidly reshaping the global economic outlook, posing a structural threat to growth, inflation, and trade flows. International Monetary Fund Managing Director Kristalina Georgieva warned of a 'much worse outcome' if the war drags into 2027, particularly if oil prices climb to around $125 a barrel. Crude prices have surged above $110 a barrel due to disruptions in the Strait of Hormuz. The inflationary impulse is building, with fertiliser prices jumping 30-40% and food prices expected to rise by 3-6%. Supply chains are fragmenting due to shipping disruptions and rising insurance premiums. The IMF's adverse scenario points to global growth slowing to around 2.5% in 2026, with inflation rising above 5%.
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