The International Monetary Fund’s director, Kristalina Georgieva, has directly linked the potential for US strikes on Iran, under the current administration, to a significant risk for global economic growth. In an interview with Bloomberg TV, Georgieva emphasized the IMF’s close watch on energy prices, warning that any surge in oil costs could trigger a ripple effect of “secondary and tertiary impacts” across the world economy, ultimately leading to a downturn in global growth prospects, particularly for major economies.
Adding to the escalating geopolitical landscape, the Iranian parliament’s recent vote to consider closing the Strait of Hormuz is a direct response to a US attack. This potential shutdown of a channel through which a fifth of the world’s oil flows could create an unprecedented oil supply shock, leading to higher inflation and a drag on economic expansion. While some experts remain skeptical about a full closure, the threat alone is causing considerable unease.
Oil markets initially reacted strongly, with prices jumping over 5% on Sunday to a five-month high of $81.40. However, this initial surge was not sustained, and Brent crude fell back to just over $76 a barrel on Monday. Nevertheless, the risk of a dramatic price increase remains, with Goldman Sachs estimating a potential $110 a barrel if Hormuz flows are significantly curtailed for an extended period.
Against this backdrop, US Secretary of State Marco Rubio has condemned any closure of the strait as “economic suicide” for Iran, publicly calling on China to influence Tehran given its heavy reliance on Hormuz for oil. Furthermore, analysts at RBC Capital Markets have cautioned against premature optimism, highlighting the “clear and present risk of energy attacks” from Iranian-backed groups and noting the fluidity of the situation, as evidenced by the reported U-turn of supertankers in the strait.