Geopolitical Risks and Rising Prices Weighing on Sentiment, Global Policymakers Say

• Geopolitical risks, especially the US-Israel war with Iran and potential disruption in the Strait of Hormuz, are creating negative supply shocks and driving up energy/commodity prices.
• The International Monetary Fund (IMF) forecasts lower global growth (potentially 2%) and higher inflation (around 6%) in severe scenarios, numbers historically associated with major crises.
• Policymakers are concerned about inflation expectations becoming de-anchored and a significant tightening of global financial conditions if the conflict intensifies or prolongs.

Global policymakers, including central bankers and finance ministers, are expressing a downbeat outlook on the global economy due to escalating geopolitical risks, particularly the US-Israel war with Iran. They anticipate negative supply shocks, rising energy and commodity prices, lower global growth, and increased inflation. Concerns are high regarding the potential for prolonged conflict and its severe impact on financial conditions and economic stability.