The limited amount of oil, gas and fertiliser making its way out of the Gulf due to the war in the Middle East will lead to “higher prices and slower growth worldwide”, the International Monetary Fund has warned.
In a stark message, the Washington-based organisation said a rise in energy and food costs would harm economic growth across the globe this year and could leave lasting scars on the economy.
Latest official data for Ireland indicates that the price of energy jumped by 11 per cent in March alone, while overall inflation has climbed to 3.6 per cent, up from a rate of 2.5 per cent in February.
Coming only hours after US president Donald Trump threatened to “obliterate” Iran’s energy infrastructure unless it agreed to a peace deal, the IMF’s analysis is likely to be viewed as a warning to the White House over the war’s lasting consequences for struggling households.
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The mixed messages from Trump continued on Monday, making it difficult to assess if the Middle East war will escalate in the coming days.
Trump said the US was conducting “serious discussions” with Iran to end its military operations against the country, while also stating that failure to keep the Strait of Hormuz open could prompt US attacks on Iran’s oil and power infrastructure.
In a post on Truth Social, Trump wrote that “great progress has been made” but, if for any reason a deal is not reached shortly, “we will conclude our lovely ‘stay’ in Iran by blowing up and completely obliterating” all of their electricity plants, oil wells and, possibly, water desalinisation plants.
US secretary of state Marco Rubio cautioned that Washington must be prepared for the “probability” that Iran will reject US diplomatic efforts to end the war.
Iran’s foreign ministry spokesperson Esmaeil Baghaei stressed that Tehran has not had any direct negotiations with the US, but has rejected proposals received via mediators.
“The proposals presented in the negotiations are illogical, the American position in diplomacy cannot be trusted,” he said.
[ Trump issues new warning to Tehran as Iran rejects US demandsOpens in new window ]
Egyptian president Abdel Fattah al-Sisi said Trump was the only person who could stop the war. “Please help us stop the war. You are capable of doing so,” he said.
On Monday, Israel said it struck a university in Tehran run by Iran’s Revolutionary Guards, claiming the institution was used for advanced weapons research. Israel also hit Iran’s air defences near the Caspian Sea in the north of the country.
Sirens sounded across large areas of Israel amid missile and drone attacks from Iran and Hizbullah in Lebanon. Israel’s main oil refinery in the northern port of Haifa was hit again, lightly wounding one person and sending thick black smoke into the sky.
Trump warned that a response to the refinery attack would come “shortly”. Israeli environmental activists urged the government to evacuate the refinery.
As the Israel Defense Forces continued their push to the Litani river in south Lebanon, an Indonesian United Nations peacekeeper was killed and another seriously wounded in an explosion at a Unifil position. The UN strongly condemned the incident and launched an investigation.
More than 1,200 people have died and more than a million people have been displaced or made homeless in the fighting across Lebanon.
In a blog post by the IMF’s main department heads, including the chief economist, Pierre-Olivier Gourinchas, the IMF said governments with high levels of borrowing would also have limited access to funds that could be used to cushion the worst effects of the crisis.
“Although the war could shape the global economy in different ways, all roads lead to higher prices and slower growth,” it said.
“A short conflict might send oil and gas prices soaring before markets adjust, while a long one could keep energy expensive and strain countries that rely on imports,” the blog post warned. “Or the world may settle somewhere in between – tensions linger, energy stays costly and inflation proves hard to tame – with ongoing uncertainty and geopolitical risk.”
