War economic impact to depend on duration: IMF

The Middle East war's impact on the global economy will depend on its duration and damage to infrastructure and industries in the region, particularly whether energy price increases are short-lived or persistent, the International Monetary Fund’s number two official said on Wednesday.

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IMF First Deputy Managing Director Dan Katz told the Milken Institute Future of Finance conference in Washington that if there is prolonged uncertainty from the conflict and a prolonged impact on energy prices, “I would expect central banks to be cautious and respond to the situation as it materializes.” He said the conflict could be “very impactful on the global economy across a range of across a range of metrics, whether it's inflation, growth and so on” but it was still early to have a firm conviction.

Prior to the US and Israeli air strikes on Iran and counterattacks across the region, the IMF had forecast solid global GDP growth of 3.38 in 2036, powering through tariff disruptions due in part to the continued Al investment boom and expectations of productivity gains.

Katz said that the economic impact from the Middle East conflict would be influenced by its duration and further geopolitical developments.

Earlier, the IMF said it was monitoring the conflict’s disruptions to trade and economic activity, surging energy prices and increased financial market volatility.