The International Monetary Fund (IMF) has urged governments to prepare for potentially unprecedented economic challenges as the conflict in the Middle East escalates. Managing Director Kristalina Georgieva warned that prolonged hostilities could disrupt markets, slow economic growth, and intensify inflation, creating new pressures on policymakers worldwide. Speaking at a symposium in Tokyo, Georgieva stressed that the crisis may generate unexpected shocks even after hostilities end, calling on countries to “think about the unthinkable and prepare for it.”

Georgieva highlighted the strain on global energy markets, noting that oil briefly surged to USD 120 per barrel amid the conflict, while key Middle Eastern producers, including the United Arab Emirates, Kuwait, and Iraq, reduced output as storage facilities reached capacity due to the effective closure of the Strait of Hormuz. She reported that shipping through the strait has dropped by 90%, a major concern as it carries roughly 20% of global oil supplies and a significant portion of liquefied natural gas (LNG) trade. For Japan, the strait accounts for nearly 60% of its oil imports and 11% of its LNG supplies, intensifying the risk of energy-related shocks.

Georgieva warned that even a sustained 10% rise in energy prices over a year could increase global inflation by 40 basis points while dampening economic growth. She emphasized that countries must strengthen domestic policies, build institutional resilience, and maintain fiscal and monetary buffers to withstand such shocks. Policymakers should invest in robust frameworks to support stable economies and encourage domestically-led private-sector growth, using monetary policy space when needed and replenishing it afterward.

The IMF chief also addressed the situation in Japan, where heavy reliance on Middle Eastern oil combined with a weak yen could trigger stagflation. Rising energy costs may prompt increased government spending while complicating efforts by the central bank to normalize monetary policy. Georgieva underscored the importance of domestic preparedness: nations have control over their own policies and must position themselves to handle external shocks effectively.

US President Donald Trump commented on the oil price surge via Truth Social, downplaying the short-term impact and asserting that prices would fall once the Iranian nuclear threat is neutralized. Meanwhile, the IMF plans to release a more detailed assessment of the global economic impact in its World Economic Outlook report scheduled for April.