The International Monetary Fund’s director, Kristalina Georgieva, has specifically highlighted the risk of the US-Iran conflict “hitting growth prospects in large economies,” leading to a “trigger impact of downward revisions in prospects for global growth.” This targeted warning underscores the potential for major economic powers to feel the brunt of escalating tensions, with ripple effects across the entire global system. The IMF chief stressed the close monitoring of energy prices as a key indicator of this risk.
A primary concern is the Iranian parliament’s recent vote to consider closing the Strait of Hormuz, a crucial maritime chokepoint through which a fifth of the world’s oil consumption flows. This retaliatory measure, in response to a US attack, threatens to create an unprecedented oil supply shock, pushing up inflation and impeding economic expansion worldwide.
Oil prices initially reacted with a jump of over 5% on Sunday, hitting a five-month high of $81.40. However, prices later retreated, with Brent crude falling nearly 1% to just over $76 a barrel on Monday. Despite this, the potential for dramatic increases remains, with Goldman Sachs estimating oil could hit $110 a barrel if Hormuz flows are substantially reduced for an extended period.
In diplomatic efforts, US Secretary of State Marco Rubio has called any closure of the strait “economic suicide” for Iran and has urged China to use its influence, given its heavy reliance on the waterway. Analysts at RBC Capital Markets are also advising caution, warning of “clear and present risk of energy attacks” from Iranian-backed militias and emphasizing that the situation remains fluid, as evidenced by two supertankers reportedly changing course in the strait.