The head of the International Monetary Fund, Kristalina Georgieva, has issued a stark warning that any US military action against Iran carries significant risks for global economic growth. Speaking to Bloomberg TV, Georgieva emphasized that the IMF is closely monitoring volatile energy prices, highlighting the potential for a surge in oil costs to trigger widespread negative consequences across the world’s economies. Such a scenario, she explained, could lead to a cascading effect, with initial shocks causing secondary and tertiary impacts that ultimately force downward revisions of global growth forecasts, especially in major economies.
Adding to the escalating tensions, the Iranian parliament recently voted to potentially close the Strait of Hormuz, a critical maritime chokepoint through which a fifth of the world’s oil supply transits. This retaliatory move, following a US attack, could severely disrupt energy flows, leading to a major oil supply shock. While Berenberg Bank’s chief economist, Holger Schmieding, acknowledged Hormuz as a key economic risk, he suggested a full disruption remains unlikely due to the high-risk nature for Tehran.
Despite initial jitters that saw oil prices jump over 5% to a five-month high of $81.40 on Sunday, prices later retreated. Brent crude experienced a nearly 1% drop on Monday, settling just above $76 a barrel. However, Goldman Sachs estimates paint a more concerning picture, predicting oil could hit $110 a barrel if flows through Hormuz are halved for a month and then remain 10% lower for the subsequent eleven months.
US Secretary of State Marco Rubio has branded a closure of the strait as “economic suicide” for Iran, urging China to leverage its influence over Tehran due to its heavy reliance on Hormuz for oil. Meanwhile, analysts at RBC Capital Markets warned of “clear and present risk of energy attacks” from Iranian-backed militias in Iraq, although the full extent of Iran’s response remains uncertain, cautioning against premature optimism about de-escalation.