ALEX BRUMMER: Middle East crisis threatens the energy market and global economy

When it comes to the International Monetary Fund (IMF), Europe continues to dominate the choice of who is in the top job.

The re-selection of Kristalina Georgieva, 70, to another five-year term is not a surprise.

Efforts to topple her over alleged manipulation of data about China, in a previous job at the World Bank, proved unsuccessful. 

And with the candidates for the November 2024 US presidential election being an advanced septuagenarian and an octogenarian, she is a mere stripling.

The spring session of the IMF this week, as was the case at last year’s annual conflab in Morocco, will be disrupted by events in the Middle East.

Challenges: Kristalina Georgieva (pictured) has been re-selected as the International Monetary Fund’s managing director for another five-year term

As Georgieva rightly noted in brief victory comments, her stewardship has been dominated by shocks including ‘pandemic, war and conflicts’.

Covid-19 may be behind us, if not consequences for the cost of living, but geo-political uncertainty dominates.

The war in Gaza, triggered by the horrific events of October 7 last year, continues. A weekend of a Star Wars-style conflict, when Iran directly attacked Israel, is part of the same. 

Moreover, Russia’s war on Ukraine, which precipitated an energy crisis and gave new legs to inflation across the globe, rages on. Yet the commitment of the West to support Ukraine is slipping. 

The US Congress is considering delinking President Biden’s proposed assistance package for the Middle East – some $14.1billion for Israel and $9.2billion of humanitarian aid for Gaza – from the $60billion for Ukraine opposed by Donald Trump.

Weekend events were a wake-up call to the Western democracies about the real and present danger in the Middle East. 

As unfortunate as Israel’s war on Gaza has been, it is Iran which poses the real threat to peace, the energy market and the global economy. 

Its proxy wars against Western shipping in the Red Sea through Houthi rebels, support of rebel anti-Western forces in Sudan (which borders on the Suez Canal), the Hezbollah occupation of large parts of southern Lebanon and Syria are all one and the same.

The direct attack on Israel with 170 explosive-laden drones, 120 ballistic missiles and 30 cruise missiles was repelled not just by Israel but by critical assistance from the US, Britain and Arab partners.

The requirement for such a co-ordinated response shows how ineffectual Western sanctions have been in restraining the Ayatollahs and their terror arm, the Iran Revolutionary Guard Corps (IRGC). 

We can expect a toughening of such measures as both the EU and US seek to prevent Israel climbing an escalation ladder.

So far the markets are becalmed. The oil price eased a little, encouraged by ‘Iron Dome’ defences, but the possibility of climbing to $110 a barrel or more, giving a new leg to inflation, is there.

Paradoxically, in spite of possible cost of living consequences of a broader conflict, it could speed postponed cuts in official rates. In times of crisis, the classic response is to ease monetary policy so as not to exacerbate matters. All of which will be a big test for the world’s economic and financial leadership in the coming days.

Treasure Hunt

Ahead of the IMF summit, Jeremy Hunt is in New York drumming up support for the UK. 

It does no harm that RAF planes were in action in defence of Israel, aligning Britain’s strategic interests with America. 

The Chancellor also has a decent economic story to tell. Tomorrow, he should be bolstered by another drop in headline inflation in March towards the 2 per cent target.

Hunt’s calls show a keen interest in bolstering the UK’s gangbusters creative industries and getting behind financial services. 

Unleashing new capital for UK start-ups, innovation and infrastructure is critical to future output gains.

Pity that Britain’s disjointed post-Brexit politics delayed such initiatives.

Disco dancing

A Revival of stock markets, deal making, bond trading and initial public offerings has lifted gloom surrounding Goldman Sachs’ boss, retired disc jockey David Solomon. First-quarter profits soared 28 per cent to £3.3billion and the shares bounced 4 per cent.

That could signal better days for under-valued Barclays, the UK’s only full service investment bank.

This post first appeared on Dailymail.co.uk