According to the International Monetary Fund (IMF), the war in the Middle East has far-reaching consequences for energy trade, global supply chains and financial markets and is putting a significant strain on the global economy.
In a blog post, the IMF describes the conflict as a “global but asymmetric shock” that operates primarily through three channels: energy prices, trade and financial conditions. The disruption to the energy supply is particularly serious.
“The war is also changing the supply chains for everyday goods and critical means of production,” emphasizes the IMF. The diversion of tankers and container ships increases freight and insurance costs and extends delivery times. Flight cancellations at key Gulf hubs hit global tourism and complicated trade.
Concern about food prices
States, companies and consumers were already feeling the impact of these supply chain problems. “With fertilizer deliveries – about a third of which pass through the Strait of Hormuz – disrupted, concerns about food prices are growing.” The reason is higher prices for fertilizers and other intermediate products.
Overall, according to the IMF, there is a risk of rising inflation and weaker growth worldwide. The severity of the impact depends on the duration, extent and destructiveness of the conflict. But one thing is already clear: the economic risks are increasing.
In countries where people spend a large proportion of their income on food – particularly in Africa, parts of the Middle East and Central America – higher prices have acute social and economic costs. But in Europe too, a further energy-related price increase would exacerbate the existing cost of living burdens.
