Iran-Israel tensions: Can Iran's economy handle a war?

IMF Warns of Broad Global Impact, Due to Conflict in the Middle East. According to 'The Guardian,' the International Monetary Fund recently highlighted the risks of escalating conflict in the Middle East with two new reports. . The reports, titled World Economic Outlook (WEO) and the Global Financial Stability Review (GFSR), comes amid heightened fears of a war between Iran and Israel. The IMF reports that the escalating conflict comes at a time when financial markets have remained optimistic of a soft landing for the global economy. The IMF reports that the escalating conflict comes at a time when financial markets have remained optimistic of a soft landing for the global economy. That soft landing, which would include lowering inflation, receding interest rates and would avoid a potential recession, could be threatened by the outbreak of war. That soft landing, which would include lowering inflation, receding interest rates and would avoid a potential recession, could be threatened by the outbreak of war. 'The Guardian' reports that previous Middle East conflicts have resulted in significantly higher oil prices. . Pierre-Olivier Gourinchas, the IMF’s economic counsellor, said the organization was evaluating the potential for another commodity shock from the conflict. The increased inflation that would come from higher energy prices would trigger a response from central banks that would tighten interest rates in order to secure inflation coming back to target, and that would weigh down on activity, Pierre-Olivier Gourinchas, IMF economic counsellor, via 'The Guardian'. The increased inflation that would come from higher energy prices would trigger a response from central banks that would tighten interest rates in order to secure inflation coming back to target, and that would weigh down on activity, Pierre-Olivier Gourinchas, IMF economic counsellor, via 'The Guardian'. It would do so in a context in which, in some countries, activity and growth is already fairly weak, so that might also have a strong effect there, Pierre-Olivier Gourinchas, IMF economic counsellor, via 'The Guardian'. According to Gourinchas, the impact of a 15% increase in the price of oil, combined with higher shipping costs, could result in a 0.7% increase in global inflation. According to Gourinchas, the impact of a 15% increase in the price of oil, combined with higher shipping costs, could result in a 0.7% increase in global inflation. Gourinchas also warned that such an increase would also bring down business confidence and global investment.