The International Monetary Fund warned at its Spring Meetings in Washington that the Middle East war is posing growing challenges to global financial stability, even as markets have so far absorbed the shock “in an orderly manner.”
IMF Financial Counsellor Tobias Adrian said global financial markets entered 2026 from a position of strength — rising asset prices, subdued volatility and easy financial conditions. But since hostilities intensified, equity prices have declined, sovereign bond yields risen and volatility increased.
“This resilience should not be taken at face value,” Adrian cautioned, noting it “reflects cycles of escalation and de-escalation, structural improvements in the financial system, and the absence of a decisive adverse turn.”
The IMF projected global debt will reach 100 percent of GDP by 2029. Under a short-lived conflict scenario, global growth would slow to 3.1 percent in 2026 with inflation rising to 4.4 percent. A prolonged war could deteriorate the outlook further through fuel prices and supply chain disruptions.
China faces particular vulnerability as the biggest buyer of Iranian oil, meeting about one-third of its domestic needs from Iran. Russia’s Foreign Minister Sergey Lavrov said in Beijing that Moscow “can undoubtedly make up for the resource deficit” for China and willing nations.
The warning comes as Sri Lanka’s delegation, led by State Minister Eran Wickramaratne, participates in the IMF Spring Meetings alongside the 5th/6th programme review. Tighter global financial conditions could affect Sri Lanka’s external financing costs and bond market outlook.
