According to the head of the International Monetary Fund, US airstrikes on Iran could increase economic uncertainty worldwide and have an impact that goes well beyond the energy markets.
As per IMF Managing Director Kristalina Georgieva, they are closely monitoring the situation in the Middle East, particularly how the conflict is affecting the price and supply of gas and oil.
Kristalina Georgieva’s comments follow the US military effectively intervening in Israel’s effort to destroy Iran’s nuclear programme by carrying out targeted strikes on Iranian nuclear facility sites, despite Tehran’s threats of retaliation that could ignite a larger regional conflict.
US President Donald Trump declared that Iran’s major nuclear installations were “utterly and totally destroyed” and warned the nation against reprisals, claiming that the US could hit more targets “with accuracy, speed, and skill.”
Kristalina Georgieva said that the IMF is studying this “as another source of uncertainty in what has been a highly uncertain environment.” The IMF is keeping an eye on two things: First, how this would impact risk premia for oil and gas. How much higher would it go? Secondly, would the energy supply be disrupted? There has been some upward movement.
“For now, no. But let’s see how events develop—whether either delivery routes or spillovers to other countries may occur. I pray, no,” she added.
Bloomberg reports state that the development caused Brent crude to briefly rise by as much as 5.7% to $81.40 per barrel during early Asian trading on June 23 before falling. The managing director acknowledged that energy prices currently reflect the transmission mechanism, particularly the channels where she believes the Middle East shock has had the biggest impact.
“There could be secondary and tertiary impacts. Let’s say there is more turbulence that hits the growth prospects of large economies, and then you have a trigger impact leading to a downward revision in global growth prospects,” she said.