Surge in Crude Prices Could Raise Global Inflation By 60 Bps, Cut Growth By Up To 0.4 pp in 2026: Gita Gopinath

A sharp rise in crude oil prices could push global inflation higher and slow down global economic growth in 2026, according to Gita Gopinath, former Chief Economist of the International Monetary Fund (IMF).

Reacting to the recent surge in crude prices globally, Gopinath said that if oil prices average around USD 85 per barrel in 2026, it could significantly impact global economic indicators.

In a social media post, she stated, "If we are now looking at an average of USD 85 a barrel for oil for 2026 then that could shave off around 0.3-0.4pp from global growth. Headline inflation could rise by 60 bps. Before the Iran conflict global growth was projected at 3.3 per cent for 2026 on the assumption oil would average USD 65 a barrel."

Crude oil prices in the international market have surged by more than 40 per cent in just 15 days amid the ongoing war involving the United States, Israel and Iran. The conflict has disrupted the energy supply route through the Strait of Hormuz and has affected global energy markets, particularly in Asia.

Before the beginning of the war, crude oil prices in international markets on February 27 were trading at around USD 73 per barrel. However, by Saturday, prices had surged sharply to around USD 103 per barrel.

The rise from USD 73 to USD 103 per barrel represents an absolute increase of USD 30 and a percentage increase of approximately 41.1 per cent in a short span of time.

The recent intense military conflict between the United States and Iran began on February 28, when U.S. and Israeli forces launched wide-ranging, direct attacks on Iranian military assets and leadership.

During the strikes led by the United States and Israel, Iran's Supreme Leader Ayatollah Ali Khamenei was also killed.

The sharp increase in crude oil prices reflects growing concerns about global energy supply disruptions as the conflict in the Middle East continues to escalate.

The Strait of Hormuz plays a crucial role in global oil transportation, and any disruption in this route has a significant impact on global energy markets.

The surge in crude prices has raised concerns among economists and policymakers about its potential impact on inflation and economic growth globally, particularly if prices remain elevated for a prolonged period. 

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