EBRD Warns Middle East Tensions Could Slow Regional Economic Growth

(MENAFN) The European Bank for Reconstruction and Development (EBRD) cautions that escalating tensions in the Middle East may hinder economic growth across its operating regions, as stated by reports. The bank highlights the potential effects of rising energy and fertilizer prices, disruptions to trade and tourism, and tighter access to financing.

In its latest Regional Economic Update, Potential Economic Impact of the Conflict in the Middle East, the EBRD notes that energy prices have surged due to interruptions in production and transport routes in the Persian Gulf.

Although current oil and natural gas prices remain below historical highs, the report warns that prolonged disruptions could drive prices even higher.

The analysis projects that if oil prices stay above $100 per barrel for an extended period and supply chain issues in chemicals and metals continue, global economic growth could fall by at least 0.4 percentage points, while inflation may rise by over 1.5 percentage points. In such a scenario, growth across the EBRD regions could also be revised downward by up to 0.4 percentage points.

The tensions are affecting both agricultural inputs and industrial supply chains. A substantial portion of global fertilizer feedstocks passes through the Strait of Hormuz, raising concerns about potential increases in food prices. Trade disruptions in Gulf routes could also impact essential materials like aluminum, sulfur, helium, petrochemicals, and plastics, contributing to global inflationary pressures.

While trade with Gulf Cooperation Council (GCC) countries is important for many EBRD economies, direct trade with Iran remains limited, according to the report.

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