International Monetary Fund Managing Director warns Strait of Hormuz disruptions could lift inflation and signals analysis in upcoming World Economic Outlook

The International Monetary Fund published prepared remarks by Managing Director Kristalina Georgieva, warning that the new conflict in the Middle East is creating fresh global macroeconomic risks through damage and stoppages at oil and gas facilities and a sharp fall in shipping through the Strait of Hormuz. She argued that policymakers should plan for repeated shocks by strengthening institutions and policy frameworks, maintaining and rebuilding buffers, and staying agile in the use of policy space. Shipping traffic through the Strait of Hormuz has fallen by 90 percent, and around a fifth of global oil supply and liquefied natural gas trade normally transits the strait, including almost half of Asia’s oil imports and about one-quarter of its LNG imports. Georgieva noted oil prices are up nearly 50 percent since December and cited an IMF rule of thumb that a persistent 10 percent oil price increase through most of the year would raise global headline inflation by 40 basis points and lower global output by 0.1–0.2 percent. The remarks also highlighted estimates that artificial intelligence could boost annual growth in Asia by up to 0.8 percentage points over the medium term and that lowering non-tariff barriers to deepen intra-Asia trade could raise Asian GDP by 1.8 percent on average in the long run, alongside references to IMF lending support with over USD 165 billion in total credit outstanding. The IMF is collecting data on the Middle East shock and indicated its assessment will be published soon in the upcoming World Economic Outlook.