BAKU, Azerbaijan, March 31. The International
Monetary Fund (IMF) reports that the war in the Middle East is not
only destroying lives and livelihoods in the region and beyond, but
is also worsening the economic outlook for countries that had only
just begun to recover from previous crises, Trend reports, citing the
IMF.

Moreover, it is noted that the global shock is uneven in nature:
energy-importing countries, poor nations, and countries with
limited financial reserves are suffering the most.

“Affected countries are experiencing serious economic
consequences, including the destruction of infrastructure and
industry, which may have long-term effects. The short-term growth
outlook for these countries remains negative.

At the same time, major energy importers in Asia and Europe are
facing rising costs for fuel and raw materials: about 25–30% of the
world’s oil and 20% of liquefied natural gas pass through the
Strait of Hormuz, meeting demand not only in Asia but also in
certain European countries. For African and Asian countries heavily
dependent on oil imports, securing the necessary supplies is
increasingly difficult, even at high prices.

“Rising food and fertilizer prices, along with tighter financial
conditions, are creating additional pressure, particularly in
low-income countries. Some of these countries may need external
support, despite the reduction in such aid,” the information
says.

The IMF notes that the war will lead to rising prices and slower
economic growth: “A short-term conflict could trigger a sharp rise
in oil and gas prices, while a prolonged conflict would keep energy
prices high and increase the burden on importing countries.”

“Energy is the main channel of impact. The de facto closure of
the Strait of Hormuz and damage to the region’s infrastructure have
caused the largest disruption in oil supplies to the global market
in history, which effectively amounts to a sudden tax on income for
importing countries.

A multi-level impact is being observed in several regions.
Energy-importing countries in Africa, the Middle East, and Latin
America are experiencing rising import costs against a backdrop of
limited budgetary and foreign exchange reserves.

In major Asian industrial economies, rising fuel and electricity
costs are increasing production costs and reducing household
purchasing power; in some countries, pressure on the balance of
payments is already affecting currencies. In Europe, the crisis is
reviving fears of a repeat of the 2021–2022 gas crisis, with Italy
and the UK particularly vulnerable due to their reliance on
gas-fired power plants, while France and Spain are relatively
protected thanks to their high share of nuclear and renewable
energy,” the fund reports.

Furthermore, it is emphasized that in oil-exporting countries in
the Middle East, parts of Africa, and Latin America that can supply
oil to the market, fiscal and external economic positions are
strengthening: “Producing countries whose supplies are limited,
including some members of the Gulf Cooperation Council, have less
potential to benefit.”

“The war is also disrupting supply chains for oil and other key
materials. The rerouting of tankers and container ships is
increasing transportation and insurance costs, as well as delivery
times. Disruptions to air traffic around key Gulf hubs are
affecting global tourism and complicating trade.”

In addition to rising commodity prices, countries, companies,
and consumers are facing the consequences of supply chain
disruptions. Disruptions in fertilizer shipments, about one-third
of which pass through the Strait of Hormuz, are increasing the risk
of rising food prices, particularly in the Northern Hemisphere
during the planting season.

Low-income countries remain the most vulnerable, where food
expenditures account for an average of about 36% of consumption,
compared with 20% in emerging economies and 9% in developed
countries. “Rising food and fertilizer prices have not only
economic but also socio-political consequences, especially given
limited budgetary resources,” the IMF reports.

The report emphasizes that shortages and price increases for
other industrial materials are also possible: “The Gulf region
supplies a significant share of the world’s helium, used in
semiconductors and medical equipment. Indonesia, which supplies
about half of the world’s nickel for electric vehicle batteries,
may face a shortage of sulfur for metal processing. East African
countries, which depend on trade and remittances from the Gulf
region, are facing a drop in demand for services, logistical
challenges, and a decline in remittances.”

“If high energy and food prices persist, this will lead to
global inflation. Historically, sustained increases in oil prices
have been accompanied by rising inflation and slower growth. Higher
transportation and production costs are reflected in the prices of
goods and services.

The impact varies by region. In Asia and parts of Latin America,
where inflation has been relatively low, rising energy and food
prices will test the resilience of expectations, particularly in
countries with weaker currencies. In Europe, a new surge in energy
prices will exacerbate existing cost-of-living pressures. In
low-income countries, rising food prices have acute social and
economic consequences.

The war has also destabilized financial markets. Global stock
indices have fallen, bond yields have risen in developed and many
developing countries, and volatility has increased. Asset sales
have tightened financial conditions.

The impact varies. In Europe and many developing countries,
higher yields and widening credit spreads are increasing the burden
of debt servicing and making refinancing more difficult for
governments and companies. “In sub-Saharan Africa and some
countries in the Middle East and South Asia, limited reserves and
market access make external financial shocks more dangerous,
especially as costs for fuel, fertilizer, and food imports rise,”
the information says.

At the same time, it is emphasized that developed countries with
deep domestic capital markets and some commodity-exporting
countries with sufficient reserves, such as Saudi Arabia, the UAE,
Brazil, and Ecuador, are better able to cope with market stress,
although they are not immune to rising risk premiums.