The International Monetary Fund (IMF) stated that the global economy has shown resilience despite the economic shock caused by the Middle East conflict. Artificial intelligence-led investments and productivity gains have helped counter the impact of higher energy and commodity prices. The IMF highlighted that uncertainty remains high, although the world economy has successfully navigated various shocks in recent years.
Julie Kozack, Director of the IMF’s Communications Department, mentioned at a press briefing that the global economy has faced and withstood numerous challenges, including the ongoing conflict in the Middle East. She pointed out that the resilience seen in the global economy is a result of two opposing forces at play.
Kozack explained that the negative supply shock from the war has driven up commodity prices, especially energy, fertiliser, and food prices. Simultaneously, there is a positive demand and productivity shock stemming from the technology cycle, particularly AI-led investments. These contrasting forces have led to a resilient global economy, according to Kozack.
Despite this resilience, the IMF cautioned that uncertainty remains elevated, and the economic repercussions of the conflict have not been evenly distributed. Kozack highlighted that countries most impacted by the conflict are commodity importers with limited fiscal space. These nations have faced increased prices for fuel, fertiliser, and food, while reaping fewer benefits from technological advancements.
The IMF’s latest World Economic Outlook, released recently, is based on certain assumptions. The forecast assumes a normalization of transit through the Strait of Hormuz by mid-July and an average oil price of around 89 US dollars per barrel in 2026. Kozack mentioned that these assumptions are integral to the July update and that ongoing assessments of oil markets, commodity prices, and shipping through the Strait of Hormuz will determine their impact on the global economy.
