The International Monetary Fund (IMF) has warned that the ongoing Middle East conflict is posing increasing risks to global financial stability, despite markets showing initial resilience.
According to the IMF, global markets entered 2026 in a strong position, supported by rising asset prices, low volatility, and favorable financial conditions. However, the outbreak of conflict has begun to test that stability.
Tobias Adrian noted that while markets have adjusted in an orderly manner, this resilience reflects temporary factors such as cycles of escalation and de-escalation, rather than a full absorption of risks.
Following the conflict, equity markets declined, bond yields rose, and volatility increased, largely driven by higher energy prices and renewed inflation concerns.
The IMF stated that although financial conditions have tightened, they remain below levels seen during past global crises. However, it warned that markets may not have fully accounted for more severe scenarios, leaving downside risks if tensions escalate further.
Rising energy costs have also pushed up inflation expectations, complicating policy decisions for central banks, with short-term interest rates increasing faster than long-term rates.
The Fund emphasized the need for clear communication and timely action by central banks to maintain price stability and confidence in the financial system.
While no major disruptions have occurred so far, the IMF cautioned that financial stability cannot be taken for granted and must be actively safeguarded amid ongoing geopolitical uncertainty.
