Washington, June 25 (IANS) The International Monetary Fund (IMF) on Thursday said the ceasefire in the Middle East and progress towards reopening the Strait of Hormuz have eased immediate risks to the global economy, although it cautioned that the full impact of the recent conflict has yet to play out.

Speaking at a regular IMF press briefing, Julie Kozack, Director of the IMF’s Communications Department, said the war had once again tested the resilience of the global economy, but recent developments had helped stabilise commodity markets and financial conditions.

“What we’ve seen is, and as we’ve said, that the war in the Middle East has tested yet again the resilience of the global economy,” Kozack said.

She said the IMF continued to assess the economic fallout through three principal channels: commodity prices, inflation and inflation expectations, and financial conditions.

“What we said in April, in terms of the way we were assessing the implications for the global economy, we were looking at three channels, and that still remains the lens through which we’re making our assessment,” she said.

According to Kozack, the ceasefire and the reopening of one of the world’s most critical shipping lanes could help support global growth if the truce holds.

“The cessation of hostilities and the path toward reopening the Strait of Hormuz is very welcome, as is the ceasefire, and if it’s sustained, it of course will support the global economy,” she said.

Oil prices, which surged during the conflict, have already retreated from their recent highs, although they remain above levels seen before the war.

“What we’ve seen is right now with oil prices is that they have fallen from their peaks, and they’re now about 10% above their pre-war levels,” Kozack said.

She added that prices of several other commodities had also eased.

“We’ve also seen declines in other commodity prices as well… jet fuel prices have declined… Natural gas prices have also fallen, base metal prices have started to fall… including in urea and some fertiliser prices.”

Kozack cautioned that supply chains would take time to return to normal because cargoes already delayed during the conflict still needed to reach global markets.

“It is going to take time for full normalisation, because it takes time for ships to move out of the strait to reach their destination,” she said.

She added that the outlook depended on the ceasefire remaining in place.

The IMF also said inflation expectations had largely remained anchored despite the energy shock, while financial conditions continued to support economic activity.

“In general, we have seen that inflation expectations have remained anchored, but we’re continuing to recommend that central banks remain vigilant,” Kozack said.

She added that financing conditions remained accommodative and countries continued to access international capital markets.

Asked whether the IMF would revise its economic scenarios published in April, Kozack declined to provide details ahead of the institution’s upcoming World Economic Outlook update.

“We’re gonna have much more to say on July 8, when we release the WEO update,” she said, adding that the report would present the IMF’s latest assessment of the global outlook.

–IANS

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