US strikes on Iran could damage global growth, says IMF chief
US strikes on Iran could damage global economic growth, the head of the International Monetary Fund has warned.
Director Kristalina Georgieva told Bloomberg TV that the IMF was watching energy prices closely, warning a rise in oil prices could have a ripple effect throughout the global economy.
'There could be secondary and tertiary impacts,' she said. 'Let's say there is more turbulence that goes into hitting growth prospects in large economies – then you have a trigger impact of downward revisions in prospects for global growth.'
The Iranian parliament voted to shut down the vital shipping channel through the strait of Hormuz over the weekend, in a retaliation against Donald Trump's attack on the country. A fifth of the world's oil consumption flows through Hormuz, which links the Persian Gulf to the Gulf of Oman and the Arabian Sea beyond.
If the strait is shut, it could create an oil supply shock that drives up energy prices, pushing up inflation and hitting economic growth.
The price of oil initially jumped by more than 5% late on Sunday to a five-month high of $81.40 (£60.58), but later fell back slightly. On Monday morning, Brent crude rose to 1.2%, at $77.94 a barrel.
The price could hit $110 a barrel if oil flows through the critical waterway were halved for a month and then remained down 10% for the following 11 months, according to new estimates from the investment bank Goldman Sachs.
Marco Rubio, the US secretary of state, has warned it would be 'economic suicide' for Iran to close the strait and pushed for China to influence Tehran on the issue.
He told Fox News: 'I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the strait of Hormuz for their oil.'
Holger Schmieding, the chief economist at Berenberg Bank, said the strait of Hormuz is 'the key economic risk to watch', but argued that a disruption to energy flows in the Gulf region 'seems unlikely', as trying to limit energy exports would be a high-risk strategy for Tehran.
Analysts at the broker RBC Capital Markets said there was a 'clear and present risk of energy attacks', which could come from Iranian-backed militias in Iraq that operate near the Basra energy facilities. However, they added it could take days or weeks before the Iranian response became clear.
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'Above all, we would caution against the kneejerk 'the worst is behind us' hot take at this stage,' they said. 'President Trump may indeed have successfully executed an 'escalate to de-escalate' move, but a wider expansion cannot still be ruled out at this juncture. We may be in the Rumsfeld 'unknown knowns' matrix in this nine-day Middle East military conflict.'
Two supertankers, each able to move about 2m barrels of crude oil, U-turned in the strait of Hormuz over the weekend after the US airstrikes, according to vessel data tracking data compiled by Bloomberg. It reported that the tankers, the Coswisdom Lake and South Loyalty, entered the strait but changed course on Sunday, sailing south away from the Persian Gulf.
Global stocks were subdued on Monday. In the UK, the FTSE 100 blue chip index slipped 0.2% in early trading, and the oil companies BP and Shell were among the few risers.
In Asia, stocks were mixed, with Japan's Nikkei 225 index down 0.1%, and Australia's S&P/ASX 200 index down 0.4%. However, China's CSI 300 rose 0.3% and Hong Kong's Hang Seng gained 0.5%.
Gold, which is traditionally seen as a stable asset during volatile periods, slipped 0.4% on Monday to $3,354.03 an ounce. The yellow metal has already hit multiple record highs this year as investors have sought somewhere to park their money during global uncertainty.
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ITV News
28 minutes ago
- ITV News
Iran, oil and the price we all pay
The world is, in theory, trying to wean itself off its dependence on hydrocarbons but oil remains the lifeblood of economic when it comes to oil, there are two types of countries: those that produce it and those that consume it. The UK is a consumer.A sustained spike in oil prices would push up the price of petrol and diesel at the pumps here and inflation more conflict between Iran and Israel, now joined by the United States, has the potential to cause another energy price shock at a time when households in the UK are still feeling bruised by the last one, triggered by Russia's invasion of Ukraine. Oil prices briefly spiked to $80 a barrel overnight, up from around $60 at the start of the month, before easing back to $ worry is that Iran may respond to the US bombing of its nuclear facilities at the weekend by attacking energy infrastructure in the Middle-East or shipping in the Strait of Hormuz. The Persian Gulf pumps a third of the world's to the US Energy Information Administration (EIA), around 20 million barrels of oil a day, around one fifth of global demand, passes through the Strait of Hormuz - from Saudi Arabia, the UAE, Kuwait, Qatar, Iraq and Iran - en route to markets, predominantly in shipping lane is also an important supply route for Liquified Natural Gas from Qatar and Abu Dhabi. What happens next to the price of energy we use depends on how and if the Islamic republic the intensity of the fighting eases so too will the upward pressure of prices. If it escalates, the oil prices would dash towards $100 a barrel and potentially beyond - JP Morgan has $120 - $130 pencilled in for 'worst-case scenario' in which the Strait of Hormuz is shut for an extended period. Iran has threatened to close the Strait of Hormuz before but has never done so, even during the 'tanker wars' between Iran and Iraq in the 1980s. There are practical reasons why not. Iran has a navy but would find a blockade hard to enforce, it would also be an act of self-harm - oil and gas revenues make-up almost half of the government's the US has a fleet stationed in the Gulf and China (which relies on imports of Iranian oil) may decide to intervene. But Iran's options are narrowing and desperate regimes sometimes take desperate measures. In the event of closure, Saudi Arabia could divert oil West through its network of pipelines but oil from Iraq, Bahrain, Kuwait and Qatar would, in effect, be stranded. The head of the International Monetary Fund (IMF) has warned that US decision to attack Iran could damage economic growth more widely if the price of oil surges. Kristalina Georgieva told Bloomberg that she 'prays' supply routes won't be worst may not happen but the perceived risk has increased, dragging the market price of energy up with living standards here in the UK, this is unhelpful. Until this month, lower oil prices - a side-effect of the trade war President Trump unleashed on April 2 - had been one of the few economic bright with a car has been enjoying the cheapest petrol and diesel prices, when adjusted for inflation, for twenty years. Sagging energy prices also strengthened the case for the Bank of England to cut interest rates. When the US fired its 'bunker buster' bombs at the Fardow nuclear site, the outlook for inflation here darkened.
Reuters
29 minutes ago
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Succession plans for Iran's Khamenei hit top gear
DUBAI, June 23 (Reuters) - The clock's ticking for senior clerics seeking a successor to Iran's Supreme Leader Ayatollah Ali Khamenei. A three-man committee from a top clerical body, appointed by Khamenei himself two years ago to identify his replacement, has accelerated its planning in recent days since Israel attacked Iran and threatened to assassinate the veteran leader, five insiders with knowledge of the discussions told Reuters. Khamenei, 86, is being regularly briefed on the talks, according to the Iranian sources who requested anonymity to discuss highly sensitive matters. He has gone into hiding with his family and is being guarded by the Vali-ye Amr special forces unit of the Revolutionary Guards, a top security official said. The ruling establishment will immediately seek to name a successor to Khamenei if he is killed, to signal stability and continuity, according to the sources who acknowledged that predicting Iran's subsequent political trajectory was difficult. A new leader will still be chosen for his devotion to the revolutionary precepts of the Islamic Republic's late founder Ayatollah Ruhollah Khomeini, according to one insider, who is close to Khamenei's office and privy to succession discussions. At the same time, the top echelon of power is also considering which candidate might present a more moderate face to ward off foreign attacks and internal revolts, the person said. Two frontrunners have emerged in the succession discussions, the five insiders said: Khamenei's 56-year-old son Mojtaba, long seen as a continuity choice, and a new contender, Hassan Khomeini, grandson of the father of the Islamic revolution. Khomeini, a close ally of the reformist faction that favours the easing of social and political restrictions, nonetheless commands respect among senior clerics and the Revolutionary Guards because of his lineage, the sources added. "I once again humbly express that this small and insignificant servant of the Iranian people stands ready to proudly be present on any front or scene you deem necessary," the 53-year-old said in a public message of support to the supreme leader on Saturday, hours before the U.S. bombed Iran's nuclear facilities. Khomeini has come into the frame as a serious candidate this month amid the conflict with Israel and America because he could represent a more conciliatory choice internationally and domestically than Mojtaba Khamenei, the five people said. By contrast, Khamenei hews closely to his father's hardline policies, according to the insiders who cautioned that nothing had been determined, candidates could change and the supreme leader would have the final say. However, with the military conflict continuing, it remains unclear whether any new leader could be chosen easily or installed securely or if he could assume the level of authority enjoyed by Khamenei, they added. Israeli strikes have also killed several of Iran's top Revolutionary Guards commanders, potentially complicating a handover of power as the elite military force has long played a central role in enforcing the supreme leader's rule. Khamenei's office and the Assembly of Experts, the clerical body from which the succession committee was drawn, were not available to comment. TRUMP: KHAMENEI IS EASY TARGET Planning for an eventual handover was already in the works because of Khamenei's age and the longstanding health concerns of a leader who has dominated all aspects of Iranian politics for decades, the sources said. The urgency of the task was underlined in September when Israel killed Hezbollah leader Sayyed Hassan Nasrallah, a close ally of Khamenei's, and the planning accelerated significantly this month following the Israeli attacks on nuclear sites, which were followed by the American attacks at the weekend. "We know exactly where the so-called 'Supreme Leader' is hiding," U.S. President Trump warned on social media last week, calling for Tehran's unconditional surrender. "He is an easy target." Khamenei hasn't publicly expressed any preference for his successor. The sources said he had repeatedly opposed the idea of his son taking over, in succession discussions in the past, concerned about any suggestion of Iran returning to the kind of hereditary rule that ended with the ousting of the shah in 1979. The role of Supreme Leader was created after the revolution and then enshrined in the constitution giving a top cleric ultimate authority in guiding the elected president and parliament. Officially, the leader is named by the Assembly of Experts, made up of 88 senior clerics who are chosen through a national election in which a hardline watchdog body aligned with Khamenei must approve all the candidates. "Whether the Islamic Republic survives or not, it will be a very different one, because the context in which it has existed has fundamentally changed," said London-based Iranian political analyst Hossein Rassam, adding that Hassan Khomeini could fit the bill for a leader to take Iran in a new direction. "The regime has to opt for someone who'll facilitate slow transition." Hassan Khomeini's close links to the reformist faction of Iranian politics, which pursued an ultimately unsuccessful policy of opening Iran to the outside world in the 1990s, saw hardline officials bar him from running as a member of senior clerical body the Assembly of Experts in 2016. The succession planners are aware that Khomeini is likely to be more palatable to the Iranian population than a hardliner, the five insiders said. Last year he warned of a "crisis of rising popular dissatisfaction" among Iranians due to poverty and deprivation. By contrast, Mojtaba Khamenei's views echo those of his father on every major topic from cracking down on opponents to taking a hardline with foreign foes, the sources said - qualities they saw as hazardous with Iran under attack. A mid-ranking cleric who teaches theology at a religious seminary in the city Qom, the centre of Iranian religious life, Mojtaba has never held a formal position the Islamic Republic, though exercises influence behind the scenes as the gatekeeper to his father, according to Iran watchers. The U.S. Treasury Department imposed sanctions on Mojtaba in 2019, saying he represented the Supreme Leader in "an official capacity despite never being elected or appointed to a government position" aside from working his father's office. Several of the candidates long seen as possible successors to Khamenei have already died. Former presidents Hashemi Rafsanjani passed away in 2017, former judiciary chief Mahmoud Hashemi Shahroudi died of natural causes in 2018 and former President Ebrahim Raisi was killed in a helicopter crash in 2023. Another senior cleric Sadegh Amoli Larijani, has been sidelined. Others, such as the Assembly of Experts member Ayatollah Alireza Arafi, are still in contention but have fallen behind Mojtaba Khamenei and Hassan Khomeini, the five sources said. Beyond the most likely candidates, it's also possible that a less prominent cleric could be chosen as a pawn of Revolutionary Guards, said Ali Vaez, Iran project director at the International Crisis Group think-tank. "It is possible that they would put forward a candidate that no one has ever heard of and would not really hold the same levers of power that Ayatollah Khamenei has held now for more than 30 years," he said. The supreme leader's voice is powerful. After the death of the Islamic Republic's founder Ruhollah Khomeini in 1989, Khamenei was publicly hailed as his predecessor's choice. Although he had already served as president, Khamenei was only a mid-ranking cleric and was initially dismissed by influential clerics as weak and an unlikely successor to his charismatic predecessor. However, he steadily tightened his grip to become Iran's unquestioned decision-maker, relying on the Revolutionary Guards as he outmanoeuvred rivals and crushed bouts of popular unrest.
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