IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
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IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki

The International Monetary Fund said on Thursday that an escalation of the conflict in the Middle East could have significant economic ramifications for the region and the global economy, but commodity prices remain below the highs of the past year.

IMF spokesperson Julie Kozack told a regular news briefing that the Fund is closely monitoring the situation in southern Lebanon with "grave concern" and offered condolences for the loss of life.

"The potential for further escalation of the conflict heightens risks and uncertainty and could have significant economic ramifications for the region and beyond," Kozack said.

According to Reuters, she said it was too early to predict specific impacts on the global economy, but noted that economies in the region have already suffered greatly, especially in Gaza, where the civilian population "faces dire socioeconomic conditions, a humanitarian crisis and insufficient aid deliveries.

The IMF estimates that Gaza's GDP declined 86% in the first half of 2024, Kozack said, while the West Bank's first-half GDP likely declined 25%, with prospects of a further deterioration.

Israel's GDP contracted by about 20% in the fourth quarter of 2023 after the conflict began, and the country has seen only a partial recovery in the first half of 2024, she added.
The IMF will update its economic projections for all countries and the global economy later in October when the global lender and World Bank hold their fall meetings in Washington.
"In Lebanon, the recent intensification of the conflict is exacerbating the country's already fragile macroeconomic and social situation," Kozack said, referring to Israel's airstrikes on Hezbollah in Lebanon.
"The conflict has inflicted a heavy human toll on the country, and it has damaged physical infrastructure."
The main channels for the conflict to impact the global economy have been through higher commodity prices, including oil and grains, as well as increased shipping costs, as vessels avoid potential missile attacks by Yemen's Houthis on vessels in the Red Sea, Kozack said. But commodity prices are currently lower than their peaks in the past year.
"I just emphasize once again that we're closely monitoring the situation, and this is a situation of great concern and very high uncertainty," she added.
Lebanon in 2022 reached a staff-level agreement with the IMF on a potential loan program, but there has been insufficient progress on required reforms, Kozack said.
"We are prepared to engage with Lebanon on a possible financing program when the situation is appropriate to do so, but it would necessitate that the actions can be taken and decisive policy measures can be taken," Kozack added. "We are currently supporting Lebanon through capacity development assistance and other areas where possible."
 

 

 

 



IATA: Air Cargo Demand Up 2.2% Despite Trade Disruptions

The International Air Transport Association (IATA) logo is seen at the International Tourism Trade Fair ITB in Berlin, Germany, March 7, 2018. REUTERS/Fabrizio Bensch 
The International Air Transport Association (IATA) logo is seen at the International Tourism Trade Fair ITB in Berlin, Germany, March 7, 2018. REUTERS/Fabrizio Bensch 
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IATA: Air Cargo Demand Up 2.2% Despite Trade Disruptions

The International Air Transport Association (IATA) logo is seen at the International Tourism Trade Fair ITB in Berlin, Germany, March 7, 2018. REUTERS/Fabrizio Bensch 
The International Air Transport Association (IATA) logo is seen at the International Tourism Trade Fair ITB in Berlin, Germany, March 7, 2018. REUTERS/Fabrizio Bensch 

Total air cargo demand, measured in cargo ton-kilometers (CTK), rose by 2.2% compared to May 2024 levels, up 3.0% for international operations, according to the International Air Transport Association (IATA).

Also, capacity, measured in available cargo ton-kilometers (ACTK), increased by 2% compared to May 2024, up 2.6% for international operations.

The Association said several factors in the operating environment should be noted, including year-on-year world industrial production, which rose 2.6% in April 2025.

Meanwhile, air cargo volumes grew 6.8% over the same period, outpacing global goods trade growth of 3.8%.

IATA said jet fuel prices in May 2025 were 18.8% lower than the previous year and 4.3% below the previous month.

It noted that global manufacturing contracted in May, with the PMI falling to 49.1, below the 50 mark that signals growth.

New export orders also remained in negative territory at 48, reflecting pressure from recent US trade policy changes, the Association revealed.

Global manufacturing output, measured by the PMI, dropped below the 50 threshold to 49.1 in May, for the first time in 2025.

This, IATA said, was a 6.9% year-on-year decrease and a 2.8% drop compared to April 2025, indicating a slight weakening in global manufacturing production compared to April 2025.

Meanwhile, output declined in May, new export orders grew 1.6 index points from April, to 48. New export orders have been directly affected by the US trade policy changes, which have reshaped global demand dynamics and impacted trade flows.

Willie Walsh, IATA’s Director General, said the rise of cargo demand globally by 2.2% in May is encouraging news as a 10.7% drop in traffic on the Asia to North America trade lane illustrated the dampening effect of shifting US trade policies.

“Even as these policies evolve, already we can see the air cargo sector’s well-tested resilience helping shippers to accommodate supply chain needs to flexibly hold back, re-route or accelerate deliveries,” he said.

Meanwhile, carriers in the Middle East continued to build momentum, expanding for the second consecutive month. The region recorded a 3.6% year-on-year rise and capacity increased by 4.2%.

Asia Pacific posted the strongest growth, up 8.3% year-on-year while capacity increased by 5.7%.

In return, North American carriers saw a -5.8% year-on-year decrease in growth for air cargo in May, the slowest growth of all regions. Capacity decreased by -3.2%.

European carriers saw 1.6% year-on-year demand growth for air cargo in May. Capacity increased 1.5%.

Also, Latin American carriers saw a 3.1% year-on-year increase in demand growth for air cargo in May. Capacity increased 3.5%.

As for African airlines, they saw a 2.1% year-on-year decrease in demand for air cargo in May. Capacity increased by 2.7%.

Trade Lane Growth

A significant decrease in the Asia-North America trade lane was expected and realized as the effect of front-loading faded and changes to the de-minimis exemption on small package shipments were enforced.

As cargo flows reorganized, several route areas responded with surprising growth, IATA said.