WASHINGTON, DC – AS the war involving Iran, the United States, and Israel continues, the global economy is already feeling the economic fallout, and experts warn that the effects could be felt for some time.
From rising oil and gas prices to increasing food costs and higher airline fares that are beginning to impact tourism, the fallout is being felt by both large and small economies. In response, three major international agencies — the International Energy Agency, International Monetary Fund, and World Bank Group — are now working together to help reduce the impact.
In a joint media statement issued this afternoon, the heads of the three organizations announced the formation of a coordination group to strengthen their institutions’ response to the energy and economic impacts of the war in the Middle East.
“The Middle East war has caused major disruptions to lives and livelihoods in the region and triggered one of the largest supply shortages in global energy market history. The impact is substantial, global, and highly asymmetric, disproportionately affecting energy importers, in particular low-income countries,” the statement read.
Since the start of the war, Iran has struck critical oil infrastructure in the Middle East, driving up energy prices. The country also moved to block the flow of vessels through the Strait of Hormuz, a key shipping route for global commodities.
The agencies acknowledged the far-reaching consequences, stating: “It is already transmitted through higher oil, gas and fertilizers prices, and is triggering concerns about food prices as well. Global supply chains — including helium, phosphate, aluminum, and other commodities — are affected, as is tourism due to flight disruptions at key Gulf hubs. The resulting market volatility, weakening of currencies in emerging economies, and concerns about inflation expectations raise the prospect of tighter monetary stances and weaker growth.”
Both the World Bank and the International Monetary Fund have previously raised concerns about the global economic outlook due to the ongoing conflict, noting that the overall impact will depend largely on how long the war continues.
The agencies explained that in times of high uncertainty, “it is paramount that our institutions join forces to monitor developments, align analysis, and coordinate support to policymakers to navigate this crisis. This is especially the case for countries that are most exposed to the downstream impacts from the war and those confronting more limited policy space and higher levels of debt.”
The Caribbean region is among the most vulnerable due to its heavy dependence on imported fuel and food.
To ensure a coordinated response, the agencies said the group will:
Assess the severity of impacts across countries and regions through coordinated data sharing on energy markets and prices, trade flows, fiscal and balance of payments pressures, inflation trends, export restrictions on key commodities, and supply chain disruptions.
Coordinate response mechanisms, which may include targeted policy advice, assessment of financing needs, provision of financial support — including concessional financing — and the use of risk mitigation tools where necessary.
Mobilize relevant stakeholders, including other multilateral, regional, and bilateral partners, to deliver coordinated and efficient support to countries in need.
The group will also work with and draw on the expertise of other international organizations where necessary.
