Policymakers from around the world warned that the ongoing conflict involving Iran is increasing risks to global growth and fueling inflation, as uncertainty over the duration of the war complicates economic decision-making.
Interviews with more than 30 central bankers, finance ministers and officials on the sidelines of the IMF-World Bank Spring Meetings showed widespread concern that the conflict, now nearing its eighth week, could have lasting economic consequences.
“The impact is already visible,” said Pierre Gramegna, pointing to rising fuel prices and inflation across multiple economies.
Officials said the war’s trajectory remains highly uncertain, making it difficult to assess its full economic impact. While some political leaders have suggested the conflict could end soon, mixed signals from key actors have left policymakers cautious.
Donald Trump said recently that the war “should be ending pretty soon,” but central bankers warned against relying on optimistic scenarios.
“We cannot bet only on the most favorable outcome,” said François Villeroy de Galhau, adding that prolonged conflict could trigger higher inflation and slower growth.
Several officials flagged the risk of stagflation — a combination of rising prices and weak economic activity — if the conflict continues and disrupts energy supplies.
Gramegna said inflation could rise by more than 1 percentage point this year if the conflict persists, and potentially by as much as 2.5 percentage points in a worst-case scenario, pushing the global economy toward stagflation.
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Energy security has emerged as a central concern, particularly due to the strategic importance of the Strait of Hormuz, through which a significant share of global oil and commodities passes.
Kyriakos Pierrakakis warned the world could be facing “the greatest energy crisis in history” if supply disruptions intensify.
He noted that not only oil but also key industrial inputs such as fertilizers and petrochemicals pass through the strait, amplifying the potential economic fallout.
Nicola Willis said a prolonged disruption could trap crude oil in the Middle East, leading to shortages in Asia and sustained inflationary pressure.
“We’re preparing for worst-case scenarios,” she said, adding that inflation could remain above target levels if supply constraints persist.
European policymakers stressed the need to strengthen energy resilience. Roland Lescure said France would accelerate investment in nuclear and renewable energy to reduce dependence on volatile external supplies.
“This crisis shows we need greater energy independence,” he said.
The conflict has also made policymaking more challenging, with central banks facing difficulty in forecasting economic conditions.
“It’s absolutely impossible to predict what will happen,” said Elisabeth Svantesson, describing the outlook as highly uncertain.
Olli Rehn said monetary policymakers were adopting a cautious approach, avoiding firm commitments on interest rate paths amid the uncertainty.
“The outlook is very foggy,” he said, adding that waiting for clearer signals may be the most prudent course of action.
Similarly, Joachim Nagel described the situation as “very opaque,” with new developments emerging daily.
Despite the uncertainty, global financial markets have shown resilience. Equity markets, particularly in the United States, have remained relatively stable, with investors appearing to look past short-term risks.
However, analysts warn that market stability could be tested if the conflict escalates or leads to sustained disruptions in energy supply chains.
For now, policymakers say the priority is to remain flexible and responsive, as the global economy navigates one of its most uncertain periods in recent years.
“The key challenge,” one official said, “is managing an economic outlook where the risks are not only high, but also constantly shifting.”
