IMF Chief Warns Iran War Triggers "Large" Global Economic Shock

Kristalina Georgieva, Managing Director of the IMF, said the scale and duration of the disruption would determine the long-term fallout, but cautioned that the effects are already widespread.

"What I can tell you is that this shock is large," Georgieva said in an interview with CBS News' Face the Nation.

She said, "13 per cent of oil, 20% of gas that would have flown in the world is now stuck for five weeks and counting," underscoring the scale of the supply disruption.

The impact, she said, is global and uneven. "Everybody uses energy. Everybody feels the pinch of prices going up... and it is asymmetric. It affects different countries differently."

Countries dependent on energy imports or located near the conflict zone are bearing the brunt, while poorer nations with limited reserves face the most severe strain.

Georgieva said the shock is already cascading across sectors, affecting fuel availability, fertiliser supplies, transportation and remittances.

"People are hurting," she said, describing shortages in several regions. "They're hurting because of sheer lack of quantities."

She pointed to growing stress across Asia, where energy rationing and supply shortages have disrupted economic activity, and warned that higher fertiliser costs could drive up global food prices.

The IMF chief also cautioned that even a ceasefire would not bring immediate relief.

"The impact is baked in," she said, noting that delayed shipments and infrastructure damage would continue to weigh on the global economy.

She added that some facilities critical to energy production could take years to fully recover. "It would take three to five years to reach its full capacity," she said, referring to damaged gas infrastructure.

In the United States, Georgieva said the impact has been relatively moderate compared to other regions, but warned that higher prices could delay efforts to bring inflation under control.

"Everybody feels the pinch of prices going up," she said, adding that the effect acts like "a tax on their income," particularly for low-income households.

She said the IMF had expected global growth to improve in 2026, but the war is now likely to result in a downgrade, depending on how long the conflict lasts and how quickly production recovers.

The crisis, she noted, comes amid a series of global shocks in recent years, but the world economy has so far shown resilience.

At the same time, she warned that policymakers must act carefully, urging governments to avoid trade restrictions on fuel and to provide targeted support to vulnerable populations.

"Help the most vulnerable... and do it on a temporary basis," she said.

The conflict has disrupted one of the world's most critical energy corridors, amplifying its economic impact across continents.

Georgieva said the episode could accelerate longer-term shifts, including greater energy diversification and efficiency, but warned that adjustment would take time.

"In the meanwhile, people and businesses will be hurting," she added.

- IANS