IMF Says Global Economy Is Weathering the Middle East War Shock, but Stays on “High Alert”
The global economy is so far absorbing the shock of the conflict in the Middle East without tipping into a slowdown, but the risks remain elevated and uneven, IMF Managing Director Kristalina Georgieva said in a blog published on 15 June 2026. More than three months into the war, she wrote, commodity prices, inflation and financial conditions have all been affected, “but not yet in ways that signal a global slowdown,” helped by strong momentum in the world’s two largest economies, the United States and China.
Drivers of Resilience
Georgieva said the Fund’s initial concern had been the impact on energy prices and the knock-on effects on inflation, and those effects have been considerable: oil prices are around 30% higher than pre-war levels, though lower than at earlier points in the conflict despite the prolonged closure of the Strait of Hormuz. Several factors have cushioned the blow. Some countries, such as China, have tapped deep oil reserves to soften the disruption, while increased production and refinery utilisation outside the Gulf — though not enough to offset the shock — have helped contain price rises.
Crucially, she noted, medium-term inflation expectations have generally remained well anchored, “an encouraging sign of confidence in central banks’ commitment to price stability.” Financial markets have also held up: government bond yields have climbed significantly since the war began, but risk assets have rallied on strong earnings, with little evidence of a broad flight to safety, leaving financial conditions accommodative by historical standards. Technology was singled out as a bright spot, with strong investment in artificial intelligence and data centres driving momentum in the economies that are holding up best, the United States foremost among them — though most countries, she cautioned, have yet to feel the productivity and growth benefits of that technology cycle, raising the risk of further economic divergence.
Summing up the global picture, Georgieva said the combination of economic resilience and technological advances had helped cushion the impact of the energy supply shock on growth worldwide, even as the outcome for individual countries depended largely on geography, the degree of energy dependence and the policy space available to respond.
An Uneven Picture
Behind the resilient global headline, Georgieva stressed, lie significant disparities. “For war impacts, proximity matters,” she wrote. Oil exporters around the Gulf that are directly affected face steep downward growth revisions this year, with five of eight such countries seeing outright contractions. Europe, heavily reliant on imported energy, is seeing growth weighed down and inflation pushed up, prompting the European Central Bank to raise interest rates. Emerging economies in Asia are also bearing the brunt, with retail gasoline prices up around 40% since the war began, alongside rising bond yields and currency pressures.
The strain is most visible in Africa, where countries that combine heavy energy-import dependence with limited policy space are hardest hit. Several — including Ethiopia, Malawi and Zambia — have been managing fuel shortages, while gasoline prices have risen by about half in countries such as Lesotho, Rwanda and Tanzania. Higher energy costs are also feeding into fertiliser and food prices, raising the risk of food insecurity if disruptions persist.
Policy Discipline and a Welcome Ceasefire
Georgieva said much depends on the duration and intensity of the energy supply shock, welcoming a ceasefire announcement and noting that “the sooner it is resolved, the better,” particularly as supply will take time to recover given the infrastructure damage. She called on policymakers to be “agile and disciplined,” maintaining price stability — some central banks have already begun tightening to keep expectations anchored — while exercising fiscal discipline. Price caps and subsidies, she cautioned, “may be popular, but they are costly”; fiscal responses should be targeted, temporary and designed to protect the vulnerable without undermining public finances.
She added that governments also need to make room for the fiscal costs of ensuring that AI-driven growth translates into shared prosperity, so that emerging and developing economies are not left behind. The Fund, she said, is stepping up support where needed, working with several countries on adjustments to existing programmes, citing requests or agreements involving The Gambia, Burkina Faso, Ethiopia, Malawi and Bangladesh.
Why It Matters for the Gulf
The assessment carries direct relevance for the Gulf. While the IMF flags that several regional oil exporters face near-term growth revisions tied to the conflict, it frames those effects as dependent on the duration and intensity of the shock rather than a permanent deterioration. The welcome ceasefire and the Fund’s emphasis on disciplined, targeted policy point to a path back toward stability, and the resilience of the United States and China supports the external demand on which Gulf economies depend.
Outlook
The IMF said it would provide an updated analysis in its World Economic Outlook Update on 8 July. For now, Georgieva’s message balanced reassurance with caution: the global economy is weathering the shock, “but not complacency.” The Fund, she concluded, “remains on high alert,” mindful of the damage some members are already suffering and committed to helping them limit the impact, especially on the most vulnerable.
Sources: International Monetary Fund.
