IMF chief warns of tough times ahead if oil prices stay high amid Middle East conflict

International Monetary Fund (IMF) Managing Director Kristalina Georgieva said Wednesday that the global economy could face difficult conditions if the conflict in the Middle East drags on and oil prices remain elevated.

Speaking at a news conference during the IMF-World Bank Spring Meetings in Washington, Georgieva said the Fund is closely monitoring developments in the region and voiced hope that a ceasefire announced last week could pave the way for lasting peace.

“The impact on the global economy is already large,” she said. “If the conflict persists and oil prices stay high for an extended period, we must brace for tough times ahead.”

Georgieva pointed to the IMF’s latest World Economic Outlook forecasts and said all countries are being affected by rising energy prices, with the burden falling more heavily on energy-importing economies.

On policy responses, she urged governments to act cautiously and avoid rushing into broad measures.

Georgieva also cautioned against untargeted support measures such as broad tax cuts, energy subsidies and price controls, saying they could deepen existing distortions.

“While the intention behind these measures may be good … such untargeted actions will only prolong the pain of high prices,” said Georgieva.

She noted that the IMF has long warned that elevated public debt levels are narrowing fiscal policy space, with repeated shocks compounding pressures on government finances.

Responding to questions from reporters, Georgieva said she is concerned about physical disruptions in supply chains, especially in Asia, where some countries are heavily dependent on imports from the Gulf region.

“What we need to recognize is not going to evaporate overnight, even if the war ends tomorrow,” she said, referring to supply-side disruptions.

On central bank policy, Georgieva said monetary authorities with strong credibility should make clear that preserving price stability remains their main objective, but avoid acting too quickly.

“What we tell central banks is, if you have high credibility, signal that your objective is to protect price stability, but don’t rush,” she said. “Wait to see how conditions would evolve. If we are to move faster out of the war, it may not be necessary to take action. But for central banks that do not have that credibility, they may need to utilize stronger signals. So, it is going to be country-specific.”

Georgieva also said the IMF has revised its 2026 inflation forecasts upward, although the broader disinflation trend remains intact despite some reversal.

“Short-term inflation expectations have moved up here in the United States; they have moved up in the euro area,” she said. “But the good news for now is that long-term inflation expectations remain well anchored, and that signals that we are still at the time when a faster resolution of hostilities is possible.”

She added that the IMF is also worried about inflation spilling into food prices, warning that delays in restoring fertilizer supply at reasonable prices could create additional pressure on global food costs.

* Writing by Mucahithan Avcioglu in Istanbul