IMF’s Georgieva warns of 'much worse outcome' if Middle East war drags into 2027

The International Monetary Fund (IMF) managing director Kristalina Georgieva warned that inflation is already picking up and the global economy could face a “much worse outcome” if the war in the Middle East drags into 2027 and oil prices hit about $125 a barrel, Reuters reported on Tuesday.

Key quotes

This scenario, with every day that passes, is further and further behind in the rear-view mirror.
The continuation of the war, a forecast of an oil price around or above $100 per barrel, and rising inflationary pressures meant the IMF's "adverse scenario" was already in effect.
Long-term inflation expectations remained anchored and financial conditions were not tightening, but that could change if the war continued.
Now, if this continues into 2027 and we have oil prices of $125 more or less, then we have to expect a much worse outcome.
Then we are going to see inflation climbing up and then inevitably, inflation expectations would start de-anchoring.