Energy Chiefs Warn Of Widening War Shock Arabian Post

(MENAFN- The Arabian Post) clearfix"> Global economic leaders have warned that the Middle East war is tightening energy supplies, disrupting trade routes and placing the heaviest burden on poorer economies already struggling with inflation, debt and food-security pressures.

The heads of the International Energy Agency, International Monetary Fund, World Bank and World Trade Organization issued the warning on Friday as the U. S.-Israel war on Iran continued to unsettle commodity markets and raise fears over the security of oil and gas flows through the Strait of Hormuz. The waterway is one of the world's most important energy corridors, carrying a large share of seaborne crude oil, liquefied natural gas and refined fuel shipments.

The joint message marked a sharper attempt by the world's main economic institutions to frame the conflict not only as a security crisis but as a direct threat to growth, trade and household living costs. Energy-importing developing economies face the most immediate risk because they have less fiscal room to absorb higher fuel bills, weaker currency buffers and greater exposure to food and fertiliser price swings.

The conflict, which began in late February, has already damaged energy infrastructure, disrupted shipping and forced traders, refiners and manufacturers to redraw supply chains. More than 40 key energy assets have been affected across the region, including oil terminals, refineries, gas-processing hubs and petrochemical facilities. The pressure has been felt across Gulf energy producers, Asian importers and global shipping markets.

The Strait of Hormuz remains central to the crisis. Any sustained disruption through the channel would affect crude flows from Gulf producers and LNG cargoes from Qatar, while adding pressure on alternative routes through the Red Sea, pipelines and longer maritime journeys around risk zones. Even partial interruptions can push up freight, insurance and fuel costs, with the effect spreading quickly into transport, electricity, manufacturing and agriculture.

See also Japan resets fuel subsidy benchmark

Market stress has already reached Asia, where factories have been building inventory buffers to guard against shortages and price jumps. Private manufacturing surveys for May showed expansion across several economies, but part of that growth reflected stockpiling rather than stronger end-demand. China's private manufacturing gauge stayed above the 50-point expansion mark at 51.8, while South Korea's factory activity reached its strongest level since March 2021. Japan's manufacturers also reported higher input costs linked to dearer raw materials.

China's oil market has shown one of the clearest signs of adjustment. Seaborne crude imports fell to 6.36 million barrels per day in May, down from 8.10 million barrels per day in April and nearly half the 11.39 million barrels per day recorded in February. The fall reflected higher prices, restricted availability from Gulf suppliers and refiners' efforts to rely on commercial inventories while prioritising domestic fuel supply.

The pressure has also altered trade patterns. Imports from Iraq and Kuwait into China dropped sharply, while refiners across Asia have sought alternative crude grades, adjusted product yields and reduced some exports to preserve domestic supply. These shifts may limit immediate shortages but are unlikely to provide a durable solution if disruption around Hormuz continues through the summer demand season.

For vulnerable economies, the danger extends beyond oil prices. Higher energy costs feed into fertiliser production, food transport, electricity tariffs and public subsidy bills. Countries with large current-account deficits or dollar-denominated debt face added strain if currency weakness magnifies import costs. Smaller economies dependent on fuel imports can be forced into difficult choices between subsidising consumers, cutting public spending or allowing inflation to rise.

See also UAE trade strategy gains Gulf test

The institutional warning also reflects concern that the war could deepen divisions in global trade. Shipping delays, insurance surcharges and uncertainty over sanctions, port access and tanker movements are complicating contract terms. Businesses are responding by holding larger inventories, diversifying suppliers and accepting higher logistics costs, moves that protect operations in the short term but reduce efficiency and weigh on margins.

Financial markets have remained sensitive to each escalation. Oil price spikes have fed into inflation expectations, while equity and bond investors have assessed the risk that central banks may have less room to ease policy if energy costs stay elevated. Emerging-market borrowers are particularly exposed because higher import bills can coincide with tighter financing conditions.

The IEA, IMF, World Bank and WTO have been discussing coordinated responses to the economic fallout, including support for countries facing balance-of-payments pressure, trade disruptions and energy insecurity. Their warning underlines a growing view that the conflict's economic damage is becoming more uneven, with the largest costs falling on economies least able to manage them.

MENAFN01062026000152002308ID1111191688