The International Monetary Fund (IMF) Director, Kristalina Georgieva, has warned that the US strikes on Iran could have negative impacts on global economic growth.
Speaking to Bloomberg TV, Georgieva said that the IMF was monitoring the energy prices closely, warning that any increase in oil prices could have reverberating effects on the global economy.
“There could be secondary and tertiary impacts. Let’s say there is more turbulence that goes into hitting growth prospects in large economies – then you have a trigger impact of downward revisions in prospects for global growth,” she said.
The IMF Director’s remarks came as the Iranian parliament approved the closure of the Strait of Hormuz, a vital shipping waterway linking the Arabian Gulf to the Gulf of Oman and the Arabian Sea. The parliament’s vote followed the US strikes on key Iranian nuclear facilities.
About fifth of the world’s oil supplies flow through Hormuz. If Iran shut the Strait, this could lead to an oil supply shock that drives energy prices higher, increasing inflation and hurting economic growth.
Following the US military escalation against Iran on Sunday, oil price increased by more than 5% to reach $81.40 before declining slightly. On Monday morning, Brent crude increased to 1.2%, at $77.94 a barrel. If oil supplies’ flow through Hormuz was cut in half for one month and then reduced by 10% for 11 months, the price could reach $110 per barrel, according to Goldman Sachs estimates.
Washington has pushed against the possibility of closing Hormuz. The US State Secretary, Marco Rubio, warned that such a move would be an “economic suicide” to Iran, urging China to intervene.
“I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the strait of Hormuz for their oil,” Rubio told Fox News.
