The International Monetary Fund has warned that the ongoing conflict in the Middle East will lead to higher prices and slower growth worldwide if it continues to disrupt the flow of oil, gas and fertiliser from the Gulf. In a stark message, the Washington-based organisation said a rise in energy and food costs would harm economic growth this year and could leave lasting scars on the global economy.
Coming only hours after Donald Trump threatened to obliterate Iran’s energy infrastructure unless it agreed to a peace deal, the IMF’s analysis is seen as a warning to the White House about the war’s lasting consequences for struggling households. The IMF said governments with high levels of borrowing will have limited access to funds to cushion the worst effects of the crisis.
While net exporters of oil and gas, such as the US, may gain from higher fossil fuel prices, the rise in bills for petrol, diesel and food will harm living standards. Businesses are expected to come under pressure to raise prices, potentially forcing central banks to increase interest rates to combat inflation. The IMF noted that a short conflict might cause oil and gas prices to surge before markets adjust, while a prolonged conflict could keep energy expensive and strain import-dependent countries.
About a third of fertiliser production travels through the Strait of Hormuz, pushing up prices. The UN Food and Agriculture Organisation projects global prices could average 15% to 20% higher in the first half of 2026 if the crisis persists. Natural gas prices have more than doubled in the UK since last December to about £140 a therm, while Brent crude oil, which cost about $60 before the conflict, hit more than $116 on Monday before falling back to $112.
In Europe, the shock is reviving memories of the 2021–22 gas crisis, with Italy and the UK especially exposed due to their reliance on gas-fired power, while France and Spain are relatively protected by greater nuclear and renewable capacity. Forecasts for sharp rises in the cost of gas and electricity next winter are forcing governments to consider higher subsidies and welfare payments to the worst-affected households.
