Crude prices surged as much as 28% to nearly $120 per barrel during trading, the highest level since July 2022, as the week-long war prompted some major Middle Eastern producers to curb supplies while investors assessed the risk of prolonged disruption to shipping through the Strait of Hormuz. Benchmark Brent crude was last trading about 16% higher at roughly $107 per barrel.

The sharp move in energy markets triggered a broad sell-off in sovereign bonds, reflecting expectations that higher oil prices could fuel inflation pressures at a time when policymakers remain focused on price stability.

Investors have been closely monitoring the geopolitical fallout from the conflict in the Middle East, a region responsible for a substantial share of global crude supply. The surge in oil prices has intensified concerns that supply disruptions could become prolonged if the conflict escalates further or maritime routes remain threatened.

The rapid rise in crude prices revived worries that energy-driven inflation could complicate the outlook for monetary policy in major economies.

Higher oil costs can feed into transportation, manufacturing and consumer prices, potentially forcing central banks to reassess interest-rate paths if inflation expectations begin to climb again. Market participants said the scale and speed of the oil rally had already begun reshaping expectations across financial markets.

The latest moves underscore how quickly geopolitical tensions in key energy-producing regions can reverberate across global financial systems, affecting commodity markets, bond yields and investor risk sentiment.

Georgieva delivered the remarks at a symposium hosted by Japan Ministry of Finance in Tokyo, where she said the conflict was once again testing the resilience of the global economy.

Georgieva said higher energy costs triggered by the regional conflict could have broad economic implications if oil prices remain elevated for an extended period.

According to her estimate, a persistent 10% rise in oil prices would translate into roughly a 0.4 percentage point increase in global inflation.Her comments underscore concerns among policymakers that geopolitical tensions in the Middle East could disrupt energy markets and complicate efforts by central banks to bring inflation under control.

Addressing officials and economists at the Tokyo symposium, Georgieva urged governments and central banks to prepare for heightened uncertainty in the global economy.

“My advice to policymakers in this new global environment is think of the unthinkable and prepare for it,” she said, referring to the potential economic shocks stemming from geopolitical instability.

Georgieva added that the latest Middle East conflict was placing additional strain on an already fragile global recovery, highlighting the need for policymakers to remain vigilant as risks to growth and price stability evolve.