Middle East war economic shock looms over IMF

The Middle East war's economic shock is overshadowing global finance talks as leaders gather in Washington this week for meetings hosted by the International Monetary Fund and the World Bank. 

Officials are examining how the conflict, which started on February 28, affects worldwide economic development and price stability and financial market safety.

The ongoing war has caused supply chain disruptions and raised energy costs while creating economic risks for developing nations and emerging markets.

The Middle East war's economic shock has prompted both institutions to revise their economic outlook. The World Bank now expects emerging markets and developing economies to grow at 3.65% in 2026, which is a decrease from the 4% projection made in October, because the ongoing war might reduce growth to 2.6%.

The inflation rate will rise to 4.9% in 2026 because of an increase from 3%, and it might reach 6.7% in the extreme worst-case situation.

The IMF has also warned that “about 45 million additional people could also face acute food insecurity if the war persists and continues to disrupt fertiliser shipments needed now.”

World Bank President Ajay Banga told Reuters, “Leadership matters, and we've come through crises in the past,” adding, “But this is a shock to the system.”

The Middle East war's economic shock is also affecting international collaboration efforts. The Atlantic Council's Chair of International Economics Josh Lipsky said, “You're trying to operate on consensus when there’s no consensus in the world right now on anything.”

He further explains that global support is needed to ensure that markets will not panic: “This is not a time to flee countries that are in problematic waters.”

The Middle East war's economic shock is causing worries regarding the economy. Former US Treasury official at the Center for Global Development Mary Svenstrup stated, “We need to have this crisis be a catalyst… we can’t ask them to sacrifice growth and development for the sake of rebuilding buffers.”

Rockefeller Foundation Vice President Eric Pelofsky said, “This new conflict threatens any recovery that occurred since the pandemic or the Ukraine war.”