IMF says escalation in ME, Ukraine can increase oil, food prices
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The International Monetary Fund said that supply shocks can cause an increase in the prices of food, energy, and transportation if escalations happen in Ukraine and the Middle East.
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Illustrative photo depicting the 'Nimbus SPB', an oil products tanker, floats in the Finnish Gulf past the Lakhta Center skyscraper, the headquarters of Russian Gazprom in St. Petersburg, Russia, on June 11, 2023 (AP Photo/Dmitri Lovetsky, File)
In its new World Economic Outlook (WEO), the International Monetary Fund(IMF) said today that an escalation in the Middle East can increase oil prices by 15% and container prices by 150% in the 2024-2025 period.
"Escalation of conflict in the Middle East leads to a surge in oil prices and in shipping costs. Oil prices are 15 percent higher, a moderate increase by historical standards. Average container prices rise by 150 percent in 2024–25, an increase similar to that following recent incidents in the Red Sea," the IMF said.
"Most of the increase in the cost of shipping is concentrated in Asia-to-Europe routes," it added.
However, according to the report, oil and container prices are predicted to go back to their baseline in 2026.
The IMF also said that supply shocks can also cause an increase in the prices of food, energy, and transportation if escalations happen in Ukraine and the Middle East.
"The conflict in Gaza and Israel could escalate further into the wider region. Continued attacks in the Red Sea and the ongoing war in Ukraine risk generating additional supply shocks adverse to the global recovery, with spikes in food, energy, and transportation costs," it stated.
It's already happening
It was reported on April 13 that oil rose to its highest level since October, rising as much as 2.6% to $92 a barrel. Futures have risen by 19% this year, with the Israeli war on Gaza adding a risk premium to the market.
In early April, Russian Deputy Prime Minister Alexander Novak stated that global oil prices are increasing partly due to the heated situation in the Middle East, which has recently seen significant escalations.
Novak also pointed out that OPEC+ takes into account the geopolitical factors before making decisions regarding oil outputs.
The World Bank warned last October that the Israeli war on Gaza may push global oil prices as high as $157 per barrel in extensive interruption.
Despite the fact that the world economy is currently doing better than it did in the 1970s, the World Bank issued a warning that the conflicts in the Middle East and Ukraine may force the world's commodity markets into uncharted territory.
