The International Monetary Fund (IMF) has issued a severe warning, stating that the ongoing conflict in the Middle East, particularly its impact on the flow of oil, gas, and fertiliser from the Gulf, will inevitably lead to “higher prices and slower growth worldwide.” This stark message, delivered by the Washington-based organisation, underscores the global reach of the crisis, affecting countries across all continents through rising energy and food costs, which are projected to harm economic growth and leave lasting scars on the global economy.

In a blogpost co-authored by key IMF department heads, including Chief Economist Pierre-Olivier Gourinchas, the institution highlighted that governments burdened with high levels of borrowing will face limited access to funds needed to mitigate the crisis's worst effects. The IMF reiterated that regardless of the specific trajectory of the war, the outcome remains consistent: elevated prices and decelerated economic expansion. While net exporters of oil and gas, such as the United States, might see gains from increased fossil fuel prices, the broader analysis indicates that surging costs for petrol, diesel, and food will diminish living standards globally. Businesses are also anticipated to face pressure to raise prices, potentially compelling central banks to increase interest rates to combat inflation.

The IMF cautioned that the duration and spread of the conflict, along with the damage inflicted on infrastructure and supply chains, are critical factors. A short conflict might cause temporary spikes in oil and gas prices before market adjustments, whereas a prolonged one could sustain high energy costs, severely straining import-reliant nations. Historically, persistent oil-price surges have been linked to higher inflation and reduced growth. The disruption to the Strait of Hormuz, a vital shipping route through which approximately a third of global fertiliser production passes, is already driving up prices. Projections from the UN Food and Agriculture Organisation suggest global food prices could rise by an average of 15% to 20% in the first half of 2026 if the crisis persists.

The economic repercussions of the Middle East conflict are being felt far beyond the region, compelling governments to implement drastic measures to contain soaring energy costs and mitigate global economic fears. Natural gas prices in the UK, for instance, have more than doubled since last December, reaching around £140 per therm. Brent crude oil, which was about $60 per barrel before the conflict, surged past $116 before settling around $112. Europe is particularly vulnerable, with the prospect of next winter's gas and electricity costs forcing governments to consider increased subsidies and welfare payments. Countries like Italy and the UK, with their reliance on gas-fired power, are especially exposed, while France and Spain benefit from greater nuclear and renewables capacity.

Across the globe, nations are scrambling to respond to the supply squeeze caused by disruptions in the Strait of Hormuz, a critical waterway for about a fifth of global crude oil and liquefied natural gas. In Egypt, Prime Minister Mostafa Madbouly announced early closing times for shops, restaurants, and shopping malls for at least a month to conserve energy, as the country's monthly energy bill escalated from £420 million to £1.25 billion for the same quantity. Australia’s Prime Minister Anthony Albanese halved the national fuel tax of 52 cents per litre for three months, an initiative expected to cost $1.75 billion, amid petrol shortages and panic buying. Public transport has been made free in Victoria and Tasmania to ease demand, and a bill was introduced to allow the government to underwrite fuel purchases to bolster supply, with Australia holding 39 days of petrol and 30 days of diesel supply.

South Korea is preparing even stricter measures, with Finance Minister Koo Yun-cheol warning that a mandatory five-day rotating ban on vehicle use, currently for public sector cars, could extend to private vehicles if the crisis escalates, potentially making demand restraint compulsory if oil prices exceed $120 per barrel. Across Asia, countries heavily dependent on Middle Eastern energy are implementing similar restrictions: Sri Lanka introduced a four-day working week to conserve fuel, Myanmar restricted private vehicles to alternate days, Bangladesh imposed rolling blackouts, and the Philippines limited non-essential travel for public sector workers. Vietnam urged citizens to stay home, cycle, car-share, or use public transport, while Thailand encouraged lighter clothing to reduce air conditioning use and experienced fuel restrictions, with one incident involving a temple worker proving his need for diesel for a cremation. Thailand's Prime Minister Anutin Charnvirakul apologised for the disruption and announced an agreement with Iran for safe passage of Thai oil vessels through the Strait.

In India’s Gujarat state, rumors of shortages led to long queues at petrol stations, prompting officials to reassure the public of sufficient fuel availability. In Britain, diesel prices approaching £2 per litre caused some small petrol station owners to close entirely. International bodies are also reacting; G7 ministers and central bank officials, meeting in Paris, acknowledged the energy, economic, financial market, and inflation consequences of the Gulf situation, with representatives from the IEA, OECD, IMF, and World Bank present to monitor developments and exchange diagnoses.

The geopolitical landscape remains volatile, significantly influenced by US President Donald Trump's repeated threats against Iran. Hours after the IMF's initial warning, Trump threatened to obliterate Iran's energy infrastructure unless a peace deal was reached. Later, he explicitly warned on Truth Social that if Iran refused to sign a peace deal to reopen the Strait of Hormuz, the US would “blow up and completely obliterate” electric plants, oil wells, and Kharg Island, potentially even desalinization plants. These mixed signals, often preceding market openings, have been criticised by Iranian officials like Mohammad-Bagher Ghalibaf as attempts to “pump” stocks, suggesting a “reverse indicator” for traders. The continued threat of military action adds another layer of uncertainty to the global economic outlook, exacerbating concerns about the conflict's lasting consequences for households and economies worldwide.