Economy

EBRD warns Iran war may cut growth by 0.4 points

Yesterday 13:50

By: Dakir Madiha

Zoom

The European Bank for Reconstruction and Development cautioned Tuesday that the ongoing Middle East conflict threatens economic growth across its regions. Higher energy costs, supply chain disruptions, and tighter financial conditions pose risks. Forecasts could drop 0.4 percentage points if oil prices stay elevated.

In its report "Potential economic impact of the Middle East conflict," the EBRD stated prolonged oil above $100 per barrel plus chemical and metals supply issues could trim global growth by at least 0.4 points. Inflation might rise over 1.5 points.

US-Israeli strikes on Iran since February 28 effectively closed the Strait of Hormuz. This route carries 20 percent of world oil supply. Brent crude exceeded $100 per barrel, hitting $113 in recent trading. Qatar declared force majeure on gas exports after Iranian drone strikes. Analysts expect at least a month to restore output.

"The conflict shows how quickly geopolitical shocks hit energy markets, supply chains, and financial conditions," said EBRD chief economist Beata Javorcik. She added effects will likely outlast hostilities.

Disruptions extend beyond oil. Much fertilizer raw material passes through Hormuz, raising food price risks. Gulf trade routes affect aluminum, petrochemicals, and plastics inputs.

The EBRD flagged twelve vulnerable economies: Egypt, Iraq, Jordan, Kenya, Lebanon, Moldova, Mongolia, Tunisia, Turkey, Ukraine. These rely heavily on energy imports, maintain Gulf trade ties, and face tight budgets. GlobalData separately named Iran, Israel, Egypt, and major Asian energy importers as contraction risks.

EBRD President Odile Renaud-Basso told Reuters earlier this month the conflict may reduce regional venture capital. Higher financing costs challenge debt-burdened nations, especially in Mediterranean and sub-Saharan Africa.

Weeks before war, EBRD forecast 3.6 percent growth for its 41 countries in 2026, 3.7 percent in 2027, buoyed by European infrastructure spending. Projections now face downward revisions. Bond yields already rose in southern and eastern Mediterranean plus Turkey. Gas markets stay tight with European storage far below recent years.