Economy
EBRD unlocks $5.9 billion for war-hit economies
The European Bank for Reconstruction and Development (EBRD) on Thursday unveiled 5 billion euros ($5.9 billion) to help shore up economies hit by the fallout of the Iran war.
In a statement, the EBRD said it will “deploy EUR5 billion in 2026 in economies impacted by Middle East conflict.”
The funds would be focused on Iraq, Jordan, Lebanon, the West Bank and Gaza “and affected neighboring economies,” including Egypt, Türkiye, Armenia and Azerbaijan, the bank said.
“The economic and social impact of the conflict is already being felt across many of the bank’s economies in the form of disrupted trade routes, energy and commodity shocks, weakened investor confidence and broader costs to the population,” it added.
Established in 1991 to help former Soviet bloc nations embrace free-market economies, the bank later extended its reach to the Middle East and Africa.
“In a time of rising uncertainty, we are stepping up where others may pull back,” said EBRD President Odile Renaud-Basso.
“We are here to support economies, clients and people in our countries of operation in tough times,” she added.
The bank said “the volume of conflict response investment will be demand driven due to the fast-changing nature of the situation.”
The funds will provide immediate relief “by supporting economic activity” and “fostering financial sector stabilization.”
EBRD will aim to strengthen energy security and aid state-owned enterprises to “ensure the uninterrupted provision of essential goods and services.”
On Thursday, it had approved “a project to support Lebanon’s retail chain,” it said, adding it also aimed to safeguard access to jobs, finance and essential services.
The International Monetary Fund expects near-term demand for its financial support to rise to between $20 billion and $50 billion as a result of spillovers from the war in the Middle East, its chief Kristalina Georgieva said on Thursday.
Georgieva said the now-paused war was testing the global economy, with a 13% cut in the daily flow of the world’s oil and a 20% cut in liquefied natural gas triggering a supply shock that had sent energy prices soaring, while disrupting supply chains.
Speaking at the IMF’s headquarters ahead of next week’s meetings of the IMF and World Bank, Georgieva said the war had prompted the Fund to cut its global growth forecast.
“Had it not been for this shock, we would have been upgrading global growth,” Georgieva said, citing momentum from strong investments in technology and supportive financial conditions. “But now, even in our most hopeful scenario, it involves a downgrade of growth.”
U.S. President Donald Trump on Tuesday announced a two-week cease-fire with Iran, but Israel’s continued bombardment of Lebanon threatens to derail talks to forge a permanent peace.
Georgieva said the war posed significant but differentiated risks to IMF members, with net oil importers – 80% of countries – affected by rising prices and supply shortages, even as major oil exporters and non-oil economies in the region had been disproportionately hit.
“Even in a best case, there will be no neat and clean return to the status quo ante,” Georgieva said. Qatar’s Ras Laffan complex, which produces 93% of the Gulf’s LNG, for instance, had been shut since March 2 and could take three to five years to return to full capacity.
“The fact is, we don’t truly know what the future holds for transits through the Strait of Hormuz, or for that matter, for the recovery of regional air traffic,” she added, flanked by graphics showing the dramatic plunge in air and ship traffic over the last six weeks. “What we do know is that growth will be slower – even if the new peace is durable.”
The conflict, which began on Feb. 28, would have ripple effects for some time, Georgieva said, including oil refinery shutdowns and refined product shortages that were disrupting transportation, tourism and trade.
Another 45 million people would face food insecurity, bringing the total number of people in hunger to over 360 million. Supply chain disruptions would also continue, given industrial dependencies on inputs such as sulphur, helium for chip-making and naphtha for plastics.
Growth forecast downgraded
The IMF will release a range of scenarios in its World Economic Outlook next week, going from a relatively swift normalization to a scenario that saw oil and gas prices remaining much higher for much longer, Georgieva said.
Even the most hopeful scenario, she said, involved a growth downgrade due to infrastructure damage, supply disruptions, losses of confidence and other scarring effects.
In January, the IMF had forecast global growth of 3.3% in 2026 and 3.2% in 2027. It was not immediately clear how much of a downgrade the IMF would announce next week.
Georgieva told Reuters on Monday that inflation forecasts would also be increased. Next week’s meetings, which will bring together thousands of finance officials from all over the world, will focus on how to weather the shock of the war and how the IMF can help countries in need, Georgieva said.
She said the IMF was well-resourced and could scale up balance of payments support through existing programs, and additional countries were expected to request aid. She did not identify any specific countries seeking help.
The expected surge in funding requests comes on top of $140 billion in active programs before the war, an IMF official said. Including credit outstanding and lending already in the pipeline, the IMF’s total commitments amount to $245 billion.
Between May 2024 and March 2025, the IMF approved over $36 billion in new lending, according to a study by Boston University.
Georgieva warned that the energy supply shock was already driving up short-run inflation expectations, although longer-run expectations had not budged.
Financial conditions had already tightened, but in an orderly manner, and some easing was now evident.
The broader impact would depend on whether the ceasefire held and resulted in a lasting peace, and how much damage the war left in its wake, Georgieva said.
Countries should not go it alone
Georgieva said a demand adjustment was unavoidable, but cautioned countries against adopting export controls, price controls and other measures that could further upset global conditions.
“I appeal to all countries to reject go-it-alone actions,” she said. “Don’t pour gasoline on the fire.” Georgieva said there was value in watching and waiting, but central banks should “step in firmly with rate hikes” if inflation expectations threatened to break anchor and trigger an inflationary spiral. But she warned against premature moves that could throw “cold water on growth.”
She noted that many countries were putting in place conservation measures, including putting limits on private vehicle use and promoting remote work. Most countries had avoided untargeted tax cuts or energy subsidies, and the IMF was working actively with countries to ensure any measures remained temporary.
Adding deficit-funded stimulus now would increase the burden on monetary policy and amplify the rise in benchmark yield curves, further driving up the cost of debt.
Public debt was generally much higher than 20 years ago, Georgieva said, urging countries to move decisively to rebuild their financial buffers after this shock, after years of failing to do so. Even before the war, global public debt was projected to rise to about 100% of gross domestic product by 2029, its highest level since 1948.
National flag carrier Turkish Airlines (THY) on Thursday announced a new chair of the board and a new chief executive.
Ahmet Olmuştur has been named the new CEO of the company, replacing Bilal Ekşi, the statement said.
Both Bolat and Ekşi are said to retire.
Şeker has been serving as the chief financial officer since 2016, while Olmuştur has been serving as the chief commercial officer of the carrier.
Turkish Airlines also said Metin Gülşen had been appointed as the chief financial officer and Harun Baştürk as chief commercial officer.
The announcement came after separate data on Thursday showed THY’s passenger count rose 16% year-over-year in March to 7.2 million.
The January-March figure jumped 12.7% from a year ago to 21.3 million.
Its occupancy rate rose by 6.1 points to 83.6%, while the first-quarter rate marked a 2.9-point increase to 83.5%.
The impact of the conflict in the Middle East on the Turkish economy may be temporary and reversible if the recent cease-fire holds, and authorities are ready with a different set of tools if the shock persists, Treasury and Finance Minister Mehmet Şimşek said Thursday.
In a live interview, Şimşek said authorities are prepared with a new response beyond steps already taken if the newly agreed U.S.-Iran cease-fire does not hold. He also pointed to the importance of measures being taken, as he touted Ankara’s capacity to tackle shocks.
“We have a good capacity to manage shocks,” the minister told Bloomberg HT broadcaster, as he recalled trade wars, issues such as drought and frost and political events last year.
He did not detail the potential response but said authorities’ “main scenario” was for a month-long war, adding that a three-month conflict would be bad.
“The macroeconomic fundamentals of emerging economies are actually strong. We saw this in Türkiye as well. Risk pricing in Türkiye dropped dramatically yesterday,” he said, referring to the fall in risk premiums in response to the two-week cease-fire agreed upon.
“The likelihood of a turnaround in risk appetite is quite high,” he added.
This week’s cease-fire has mostly halted the more than five-week war that gripped the Middle East and sent energy prices soaring, although Israel bombed more targets in Lebanon on Thursday, potentially jeopardizing the deal.
Answering questions in the interview, Şimşek described the shocks from the war as the biggest since World War II, referring particularly to disruptions related to energy supplies.
“Reaching a cease-fire is welcome, but normalization will take months at best,” he suggested.
He also drew attention to the risk of global inflation, even stagflation and recession.
“There is a much bigger shock than those experienced in the 1970s. If high energy prices remain a concern, there is a risk of a global recession,” he noted.
He also highlighted that the continuation of the cease-fire and the reconstruction of supply chains are crucial.
“The oil shock – it reduces growth in many countries, there is a cost dimension. … There are negative effects on growth. It triggers fund outflows. If this shock continues, there is a high probability of inflation, growth … stagflation, and a risk of recession,” he explained.
Şimşek also said the central bank’s reserves had fallen by about $48.7 billion since the war began and that some $162 billion remained. He also conveyed the expectations for reserves to rebound.
“We are better off than in the past in terms of reserve adequacy, close to the IMF’s indicator. There is currently no problem with reserves; our reserves are strong. We are also in surplus in net reserves, excluding swaps,” he said.
Comparing Türkiye with other stock markets, including those far away from the region, Şimşek said that Turkish stock markets “have proven resilient” in the face of declines. “This means that Türkiye is performing better than other developing countries,” he suggested.
Disinflation priority
Among others, the minister emphasized that the government remains committed to its goal of disinflation and lowering prices, also conveying that they found certain assessments for inflation heading towards 30% as “exaggerated.”
“The core of our program is combating the high cost of living. The sliding scale adjustment system is one example of this,” he said, referring to a special system introduced to curb the impact of higher fuel prices on consumers.
He also dismissed the revision of the government’s targets, adding: “We can’t say, ‘Let’s publish a new Medium-Term Program.’ We don’t see such a need.”
Similarly, he also said there is some deterioration in growth expectations and expectations related to the current account balance. He also noted that, besides energy, Türkiye has trade and tourism relations with the conflict-impacted region.
The minister also pointed to the potential of Türkiye emerging as a supplier in the region with the disruption of flows through the Strait of Hormuz.
“What’s important for us is to maintain the general outline of the program; there may be deviations from the targets, let’s be realistic, but we will ensure that it converges towards the targets,” he said.
The International Monetary Fund (IMF) greenlighted $700 million more in loans for Sri Lanka on Thursday, while urging Colombo to speed up reforms to guard its post-2022 economic recovery and address shocks from the Middle East crisis.
The fund’s mission approved the latest tranche of its four-year $2.9 billion bailout, provided officials restore cost recovery in energy pricing, among other conditions.
The government has said it will spend nearly $200 million on fuel subsidies after an energy crunch caused by the Iran war forced it to raise retail prices by a third, in line with global trends.
The IMF is opposed to general energy subsidies and wants Colombo to ensure cost recovery in electricity prices, which are subsidised for smaller consumers.
“Sri Lanka is significantly exposed to the Middle East conflict, which has heightened energy prices, disrupted a key air hub for tourists, and affected Sri Lankans working in the region,” the IMF said in a statement.
It emphasized the “urgency of accelerating reform momentum to safeguard macroeconomic stability.”
Colombo had been on the verge of drawing an IMF instalment of $340 million when it was hit in November by Cyclone Ditwah, the island’s worst natural disaster in two decades that killed at least 641 people and made thousands homeless.
The World Bank estimated infrastructure damage at $4.1 billion, and the government requested that the IMF give it a $206 million emergency loan for disaster relief instead.
Sri Lanka’s economy suffered its worst recession in 2022, contracting 7.3%, when then-president Gotabaya Rajapaksa resigned after months of street protests.
The leftist administration of President Anura Kumara Dissanayake, who came to power in late 2024, has retained many of the austerity measures and high taxes introduced by his predecessor.
Shippers looking to revive the passage of tankers through the Strait of Hormuz were seeking clarity on the logistics, while refiners inquired about new crude loadings on Wednesday, in response to a cease-fire deal between the U.S. and Iran.
Most stranded oil and gas tankers remained inside the Gulf, LSEG shipping data showed, hours after President Donald Trump announced the two-week cease-fire and said the U.S. would help with the traffic build-up.
Iran’s foreign minister, Abbas Araqchi, said that if attacks against it stop, Tehran would cease counter-attacks and provide safe passage in coordination with its armed forces “and with due consideration of technical limitations.”
Ship tracker Kpler said some 187 laden tankers carrying 172 million barrels of crude oil and refined products were afloat inside the strait as of Tuesday.
A senior Iranian official involved in the discussions told Reuters Tehran could open the Strait of Hormuz on Thursday or Friday ahead of planned peace talks in Pakistan, if a framework for the cease-fire is agreed.
With more than 1,000 ocean-going vessels trapped within the Gulf, it would likely take more than two weeks to clear the backlog even under normal conditions, said Daejin Lee, global head of research at Fertmax FZCO.
“A 14-day window is simply too short to restore the level of confidence needed to fully unwind the embedded uncertainty premium – particularly for Arabian Gulf loading routes,” he said.
Lee said details remained unclear, including what actions ships and charterers must take to gain passage.
“Many blue-chip shipowners may wait several days to ensure the cease-fire holds before committing vessels,” he said.
Jakob Larsen, chief safety and security officer at shipping association Bimco, said the industry was awaiting technical details from the U.S. and Iran.
“Leaving the … Gulf without prior coordination with the U.S. and Iran would entail heightened risk and would not be advisable,” he said.
Wait-and-see
Iran blockaded the strait in response to U.S. and Israeli attacks that started on Feb. 28, all but closing the waterway through which 20% of global oil and liquefied natural gas cargoes transit, sending energy prices soaring and rattling economies and markets. The cease-fire, announced about 90 minutes before Trump’s deadline to reopen the strait, led to a plunge in oil prices.
Two shipbrokers said shipowners are likely to remain in a wait-and-see mode before allowing vessels to enter the Gulf.
Inquiries for very large crude carriers to load Middle East crude for Asia jumped on Wednesday with Asian refiners including Reliance Industries, Indian Oil Corp, Nghi Son Refinery and Petrochemical and CNOOC, as well as Abu Dhabi National Oil Co, Glencore and TotalEnergies, looking for vessels, three shipping sources said.
Glencore and TotalEnergies declined to comment. The other firms named did not immediately respond to requests for comment. Danish shipping group Maersk said the cease-fire may create transit opportunities for vessels in the Strait of Hormuz, but that it did not yet provide full maritime certainty.
Indonesia’s Foreign Ministry said it is working with Iranian authorities to secure the passage of two Pertamina vessels that have been stranded in the gulf.
“Several technical matters are being followed up to ensure safe passage through, including matters such as insurance and crew readiness,” said ministry spokesperson Vahd Nabyl Achmad Mulachela.
China’s Foreign Ministry said it hopes all parties make joint efforts to facilitate early resumption of normal trade through the strait, while Japanese Prime Minister Sanae Takaichi held talks with Iran’s president.
Asian economies are the main buyers of oil shipped through the strait and have been hit especially hard by the disruption.
“We expect tankers and oil flowing to Iranian-friendly countries to be the first ones to transit,” said Anoop Singh, global head of shipping research at Oil Brokerage.
“Most of the crude tankers will be allowed to pass,” he said, adding that he expects more than 50 Very Large Crude Carriers and about 15 Suezmaxes to exit.
Global stock markets took a breather on Wednesday while oil dipped below $100 a barrel as a two-week Middle East cease-fire was agreed and hopes arose for a resumption of oil and gas flows through the Strait of Hormuz.
The news capped weeks of market volatility and geopolitical upheaval after U.S. and Israeli strikes on Iran at the end of February pushed tensions to the brink, with Tehran effectively choking off the strategic waterway that typically carries about 20% of the world’s energy supplies.
U.S. President Donald Trump on Tuesday announced the cease-fire less than two hours before his deadline for Iran to reopen the strait or face devastating attacks on its civilian infrastructure. Iran said it would cease counterattacks and provide safe passage through the waterway if attacks against it stop.
The market rally revived investor talk of the “TACO trade” – or “Trump Always Chickens Out” – after past policy reversals, although some noted the damage to energy infrastructure across the Middle East over the month-long conflict would inflict long-term strains on the global economy and the prospect of a lasting peace was far from certain.
Market reaction was swift and dramatic, as oil prices plunged and stocks from Asia to Europe rallied.
“It’s a huge relief to see that we finally have a cease-fire between the U.S. and Iran,” said Nabil Milali, portfolio manager at Edmond de Rothschild, adding he believed Trump had calculated that further escalation would likely backfire.
“So he did the only other option he had in front of him, which is a unilateral TACO,” he said.
Oil prices would likely remain “structurally higher” for a while, he added.
Brent oil futures were last down 13.7% at $94.29 by midday, while U.S crude futures were down 16% at $94.93 a barrel, but were still well above pre-war levels.
European stocks rose 4%, following strong gains across Asian markets. Wall Street futures pointed to gains of 2.7%-3.5%.
The U.S. dollar fell broadly, having been the haven of choice during the tumult, with the index against other major currencies easing to 98.842.
“Markets can worry about the complexities later. For now, they’ve been given the green light to rally,” said Matt Simpson, a senior market analyst at StoneX.
Two weeks of relief
The six-week conflict had sent oil prices soaring, reignited inflation fears and thrown the global rates outlook into disarray, forcing governments and companies to scramble for cover against a sudden energy shock.
Trump’s social media announcement on the cease-fire marked an abrupt reversal from hours earlier, when he issued an extraordinary warning that “a whole civilization will die tonight” unless his demands were met.
Beyond the immediate relief, investors remain keen to see whether the cease-fire leads to a broader resolution before placing major bets.
“Does it mean people are going to take new risks? No, it doesn’t,” said Martin Whetton, head of financial markets strategy at Westpac. “It would have to actually be a lasting peace (to change things). People aren’t actually taking risk.”
Gold prices climbed 1.7% to $4,783 per ounce.
U.S. Treasuries surged after the announcement, with traders putting the prospect of rate cuts from the Federal Reserve later in the year back on the table, although doubts about whether oil prices will go back to pre-war levels kept enthusiasm in check.
The yield on the benchmark U.S. 10-year Treasury note dropped to 4.2438%, the lowest since mid-March, while the U.S. two-year Treasury notes sank to 3.7318%.
Eurozone government bond yields also dropped sharply, as the ceasefire prompted traders to dramatically scale back their bets on future rate hikes from the European Central Bank (ECB).
“The evolution of oil would determine if this rally (in bonds) continues or gets faded, which of course depends on how the negotiations go,” said Rohan Khanna, head of euro rates strategy at Barclays.
“In the very short term, it may remove the impulse for the ECB to hike rates in April and the market has repriced that meeting accordingly, but the meeting is still three weeks away, and that’s a long time in these markets.”
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