The war with Iran could take a toll on the global economy, the International Monetary Fund said on Tuesday.Credit…
The International Monetary Fund warned on Tuesday that the war with Iran could darken the global economic outlook if a prolonged regional conflict caused energy prices to spike.
A senior fund official, Dan Katz, said that the war could be “very impactful on the global economy across a range of metrics,” pointing to inflation and economic growth. Oil and gas prices surged over the last 48 hours since the United States and Israel attacked Iran amid fears about disruptions to global energy supplies.
“The persistence of the conflict in particular is going to drive most of the impact,” said Mr. Katz, who assumed the No. 2 role at the monetary fund late last year after serving as chief of staff to Treasury Secretary Scott Bessent.
Mr. Katz, speaking at a Milken Institute conference in Washington, said that the fund would be watching to see how the war affected energy prices, tourism and infrastructure in the region. He added that disruptions to the energy sector were most likely to have a broader effect.
“There certainly could be linkages in the global economy,” Mr. Katz said, pointing to the recent surge in oil and gas prices. “That would be a very significant transmission channel into economies on a global basis.”
The monetary fund is also tracking how financial markets are responding to the conflict. Mr. Katz noted that interest rates have increased since the United States and Israel launched strikes in Iran on Saturday. Concerns that inflation will be resurgent because of an oil price shock, he said, could lead to a monetary policy response that would lead to higher interest rates.
“If you’re in a world where there’s a more persistent shock and higher energy costs do result in destabilizing inflation expectations, then that’s a scenario in which you could see central banks responding,” Mr. Katz said.
The fund projected in October that global economic growth would slow to 3.1 percent this year from 3.2 percent in 2025. That was an upgrade from its previous forecast, as the effect of U.S. tariffs was not as detrimental as its economists had feared.
Mr. Katz said that the fund had been anticipating that global uncertainty might shift this year from concerns about international economic relations to the expansion of artificial intelligence until geopolitical tension flared over the weekend.
The State Department is “actively securing military aircraft and charter flights” for Americans looking to leave the Middle East, an assistant secretary of state, Dylan Johnson, said on social media. The State Department had earlier told stranded Americans to arrange their own travel amid widespread cancellations of commercial flights and closure of airspace. Several people responding to Mr. Johnson’s post on X said they have called the number offered by the State Department, only to be told no flights are available.
The Israeli military said it intercepted two “projectiles” fired from Lebanon, while a third fell “in an open area.” The military did not identify the group behind the launches, but if Hezbollah, which operates out of Lebanon, was responsible, the attack would mark a further escalation in hostilities between Israel and Hezbollah. The Iran-backed group fired drones and rockets toward Israel on Monday. No advance alert preceded this barrage, catching many Israelis off guard.
