A prolonged period of oil prices above $100 per barrel could slow global economic growth and push inflation higher, the European Bank for Reconstruction and Development (EBRD) warned Thursday, as the Middle East conflict drives energy costs up.
The EBRD, which was initially established to support former Soviet bloc nations’ transition to free-market economies before expanding its operations to the Middle East and Africa, said that a 10 per cent rise in average oil prices typically corresponds to a 0.1 percentage-point drop in global growth.
Since the outbreak of the US-Israel conflict with Iran nearly four weeks ago, benchmark oil prices have surged 40-45 per cent, with Brent crude trading above $105 on Thursday.
“If oil remains above US$100 per barrel for a prolonged period and supply-chain disruptions involving chemicals and metals continue, global growth could be reduced by at least 0.4 percentage points, while inflation could rise by more than 1.5 percentage points,” the bank said. Economies with high energy import costs and strong trade or remittance links to the Gulf are especially vulnerable.
The EBRD added that it may revise down its growth forecast for its regions by up to 0.4 percentage points in its next update in June. “The conflict shows how quickly geopolitical shocks can ripple through energy markets, supply chains, and financial conditions,” said Beata Javorcik, EBRD chief economist. She also warned that the fallout could strain government budgets already stretched by high defense spending in Central Europe and elevated debt costs across southern and eastern Mediterranean countries and sub-Saharan Africa.
Meanwhile, the Organization for Economic Cooperation and Development (OECD) maintained its global growth forecast at 2.9 per cent for 2026, despite lowering its outlook for Europe. The OECD noted that global growth had been resilient prior to the conflict and could have been 0.3 percentage points higher without the escalation.
At the opening of the WTO ministerial conference Thursday, World Trade Organization chief Ngozi Okonjo-Iweala cautioned that the global trading system is experiencing its “worst disruptions in the past 80 years.” She said the world order and multilateral system have “irrevocably changed,” noting that trade in energy, fertilizer, and food had already been destabilized even before the Gulf conflict.
