^{Photo: Atlantic Council}

More than 30 central bankers, finance ministers, and senior policymakers gathered at the IMF and World Bank Spring Meetings in Washington, D.C. this week, offering a rare consolidated view of the risks facing the global economy. Across these high-level discussions, one issue dominated the agenda: the ongoing U.S.–Iran conflict, now approaching its eighth consecutive week.

The conversations, based on interviews conducted with CNBC, revealed a shared concern that geopolitical instability is increasingly becoming a primary driver of macroeconomic uncertainty. Officials from multiple regions warned that the conflict is no longer a localized political issue but a global economic shock influencing inflation trends, trade flows, and growth projections.

One of the most immediate concerns highlighted by policymakers is inflation. Rising energy prices triggered by tensions in the Middle East have already begun feeding into global supply chains. Oil markets have experienced significant volatility, with price swings impacting transportation costs, manufacturing inputs, and food distribution networks. Several officials noted that even a sustained 5 to 10 percent increase in crude prices can translate into noticeable inflationary pressure within weeks.

Growth forecasts are also being reassessed. While global GDP was initially expected to maintain moderate expansion in the range of 2.5 to 3 percent this year, internal revisions discussed at the meetings suggest that prolonged instability could shave off 0.3 to 0.7 percentage points from global output, depending on the duration and intensity of the conflict. Emerging markets, particularly energy-importing economies, are expected to be the most vulnerable.

Trade disruptions were another recurring theme. Shipping routes and logistics networks remain sensitive to geopolitical risks in the Middle East, and any escalation could lead to higher freight costs and delayed supply chains. Officials noted that even temporary disruptions in key energy corridors can have ripple effects across Asia, Europe, and parts of Africa.

Central bankers are also facing a difficult policy environment. On one hand, inflationary pressures driven by energy costs may require tighter monetary policy. On the other, weakening growth and fragile consumer demand argue for caution. This policy tension is raising the risk of stagflation in several advanced economies, particularly those already experiencing subdued growth.

Several policymakers emphasized that uncertainty itself is now a major economic variable. Investment decisions, corporate hiring plans, and capital flows are increasingly being delayed or scaled back due to unpredictable geopolitical conditions. In financial markets, volatility indices have remained elevated compared to historical averages, reflecting persistent risk aversion among investors.

Another concern raised during discussions is the long-term impact on global energy transition strategies. High and unstable fossil fuel prices could either accelerate investment in renewable energy or, conversely, force countries to rely more heavily on traditional energy sources in the short term to maintain price stability.

Despite the challenges, officials acknowledged that coordinated international policy responses could help mitigate some of the economic fallout. However, the lack of clarity around the duration of the conflict continues to make accurate forecasting difficult.

As the IMF and World Bank meetings conclude, the overarching message from policymakers is clear: geopolitical instability is no longer a peripheral risk but a central driver of global economic conditions, with the U.S.–Iran conflict now sitting at the heart of that uncertainty.