IMF’s Georgieva: World economy is being tested by a large shock
Over in Washington DC, the International Monetary Fund is holding a debate on the global economy.
IMF chief Kristalina Georgieva says the world economy is facing another, large, shock:
The world economy has been, very resilient over the last few years, facing shock after the shock. And this resilience is tested yet again, this time by a shock that is large.
Twenty percent of oil and gas is stuck in the Strait of Hormuz, depriving primarily Asia, but also Europe, and other parts of the world of a vital resource. It is global. Everybody feels the impact.
Georgieva says the conflict is “very hard” on energy exporters, both on their people and their economy.
But if you are an oil importer, “you feel the pain more”, she says.
The countries most vulnerable to this shock are low income countries, Georgieva continues, saying those in the Pacific Islands may wonder “would a tanker ever come all the way to me at the end of this supply chain?”
She adds:
We now have a ceasefire. We pray for the ceasefire to turn into a durable peace. But that is not done yet.
Key events
Mohammed Aljadaan, Saudi minister of finance, points out that the oil prices on trading screens don’t reflect the reality out there.
Aljadaan tells the IMF debate on the global economy:
There is a huge difference between what you see in the screen and how much you pay to get that commodity. And it has never been as more expensive as it is now, historically.
So you see on the screen $90 a barrel. Good luck if you get an oil barrel for $90, it’s $120, $130, $140, $150, $160.
[The futures price of Brent crude is currently $99.50 a barrel – but that doesn’t reflect issues such as the jump in insurance costs, and shipping rates].
France’s central bank chief, François Villeroy de Galhau, warns that the current situation is “more than uncertain. It’s unpredictable and even unknown”.”
But there are two things we do know, he says.
1) First, the starting position on inflation is significantly better than in 2022. In the eurozone, inflation was about 2% before the Iran war, rather than “beyond 5% in February 22”.
2) Central bankers know their ‘reaction function’ – how they will respond to an energy price shock.
Villeroy de Galhau explains:
We are not responsible for the first round effect in energy prices and indirect effects for other products like fertilisers, plastics, helium, etc. but we are responsible to prevent second round effects and inflation becoming persistent through wages, through spill-over to services and manufactured goods products.
And this is how we will act. We will have no hesitation to act if and when necessary to prevent the spill-over effect. Be sure about that. But we will not rush.
Saudi Arabia’s minister of finance, Mohammed Aljadaan, warns the IMF’s debate that anyone who’s counting for a quick recovery in the energy market, even if there is a total end of hostilities, should “please recalculate”.
He explains:
Reality is, even if the war ceases today and, everybody shakes hands and smiles and [there are] no more hostilities, it will take weeks if not months before normal operations resume and commodities flows. People need to ramp up their production.
Markets and insurance companies and tankers owners will need some time to get comfortable that there is a proper central command [on the Iranian side], so that tankers are not attacked, he adds.
Georgieva: don’t make energy crisis worse with ‘generous’ support
IMF chief Kristalina Georgieva goes on to warn policymakers not to make the oil and gas crisis worse by implementing measure to increase demand for energy.
She tells delegates at the IMF’s spring meeting in Washington DC that “everyone” will experience some pain from the current disruption.
Because of this equilibrium: Less supply, same demand, [means] prices go up. So brace for this pain. But please don’t make it worse.
Georgieva explains it would be a mistake to provide support “generously”, saying:
Don’t put in place policies that would increase demand rather than shrink it, out of good intentions to help the vulnerable people.
That’s a warning against subsidising energy to cushion the impact of higher prices.
[Economists argue that with so much oil and gas vanishing from the market, prices will rise to levels where some countries cannot afford it, creating ‘demand destruction’].
IMF’s Georgieva: World economy is being tested by a large shock
Over in Washington DC, the International Monetary Fund is holding a debate on the global economy.
IMF chief Kristalina Georgieva says the world economy is facing another, large, shock:
The world economy has been, very resilient over the last few years, facing shock after the shock. And this resilience is tested yet again, this time by a shock that is large.
Twenty percent of oil and gas is stuck in the Strait of Hormuz, depriving primarily Asia, but also Europe, and other parts of the world of a vital resource. It is global. Everybody feels the impact.
Georgieva says the conflict is “very hard” on energy exporters, both on their people and their economy.
But if you are an oil importer, “you feel the pain more”, she says.
The countries most vulnerable to this shock are low income countries, Georgieva continues, saying those in the Pacific Islands may wonder “would a tanker ever come all the way to me at the end of this supply chain?”
She adds:
We now have a ceasefire. We pray for the ceasefire to turn into a durable peace. But that is not done yet.
KLM cancels 160 flights in coming month due to rising fuel costs
Dutch airline KLM is to cancel 160 flights in Europe in the coming month due to rising fuel costs.
The Dutch arm of airline group Air France KLM said the cancellations affected less than 1% of its total European flights. KLM also said it was not experiencing a shortage of jet fuel (via Reuters).
Oil rises as Hegseth says US is ‘locked and loaded’ to finish the job
The oil price has pushed higher, after some combative comments from US defense secretary Pete Hegseth.
Hegseth said Iran could settle the conflict “the nice way,” through a deal “or we can do it the hard way.” He also pledged to maintain the blockade on Iranian ports.
My colleague Joseph Gedeon reports:
Iran’s energy infrastructure is “not destroyed yet” and the US is “locked and loaded” to finish the job, Pete Hegseth, the defense secretary, said on Thursday as he called many of the press corps gathered the moral equivalent of the Pharisees who conspired to destroy Jesus Christ.
Hegseth’s comments from the Pentagon podium came as a naval blockade of Iranian ports began this week and he called on Tehran to accept a nuclear deal or face consequences for its remaining infrastructure, power generation and energy industry.
“We are reloading with more power than ever before, and better intelligence, even more importantly, better intelligence than ever before,” he said.
“You are digging out your remaining launchers and missiles with no ability to replace them. You can dig out for now. Can’t reconstitute, but we can,” he also said about Iran’s military leadership.
Brent crude is now up more than 3%, at $98 a barrel.
Intertek rebuts takeover approach after it leaks online
Jasper Jolly
FTSE 100 testing and inspections company Intertek has rejected a £7.9bn takeover bid by a Swedish private equity firm – after it was revealed on an obscure Argentine website.
Intertek on Thursday said that it rejected the £51.50 per share bid from EQT, saying it undervalued the company.
EQT was forced to announce its bid after the approach was reported on an obscure website purporting to be a radio station from a small city in Argentina to the south of Buenos Aires. The site mixes anonymous articles on business topics in both English and Spanish. The scoop was revealed in a brief, unsigned article which made no reference to its sources.
Website analysis tools linked the site to locations in Sofia, the capital of Bulgaria.
Whatever the source of the leak, EQT said on Thursday that it was “considering its options” after its cash offer was rejected. EQT has until 14 May to make a firm offer or to walk away.
EQT, which has offices in several European cities, including London, had approached Intertek on Friday. The bid was rejected on Monday and Intertek on Tuesday then announced a strategic review of the business to look at selling or demerging its energy and infrastructure business.
In a statement on Thursday afternoon, Intertek said:
“The board of Intertek carefully reviewed EQT’s proposal with its advisers and unanimously concluded that it fundamentally undervalues Intertek and its future prospects. Accordingly, the Intertek Board unanimously and unequivocally rejected the proposal on 13 April 2026.”
Shares in Intertek are up 10% today, having also jumped 12% on Tuesday.
Royal Mail staff agree deal over USO changes
Mark Sweney
Royal Mail has reached a deal with the postal workers’ union over pay and plans to reduce the number of days second class letters are delivered across the UK.
Royal Mail, which is routinely fined millions of pounds a year by the postal regulator for missing mandated delivery targets, said that the deal paves the way for improving its quality of service.
The company, which was acquired by Czech billionaire Daniel Křetínský for £3.6bn last year, was given permission by Ofcom to loosen its universal service obligations (USO) last July.
Royal Mail has been piloting the reforms, which include ending second-class post on Saturdays and reduce the service to alternating weekdays from Monday to Friday, in 35 offices.
However, the deal with the Communications Workers Union (CWU) will see the new reforms extended to another 240 delivery offices as part of a wider trial.
The aim is to complete the rollout across Royal Mail’s full 1,200 UK network by the end of the year.
Royal Mail had lobbied for years for the changes in line with dramatically declining letter volumes, from a peak of 20bn annually in 2004/5 to 6.3bn in 2024/25.
The deal also includes a pay rise and better terms for workers who joined Royal Mail on, or after, 1 December 2022.
“This agreement with the CWU paves the way for universal service reform rollout and represents a significant investment in our people,” said Alistair Cochrane, chief executive of Royal Mail, adding:
“Moving ahead with reform will make a real difference to Royal Mail’s quality of service, supporting the delivery of reliable, efficient and financially sustainable postal service for our customers across the UK.”
Last month, Royal Mail was criticised for announcing another hike in the cost of first- and second-class stamps while providing what Citizens Advice described as a “failing service”.
From 7 April, the price of a first-class stamp rose to £1.80, while the cost of the second-class service increased to 91p.
Royal Mail blamed the need for price increases on the “continued rise in the cost of delivery for every letter”.
In October, Royal Mail was fined £21m for missing its annual delivery targets for first- and second-class mail, leading to millions of letters arriving late across the UK, according to the regulator Ofcom.
The jump in jet fuel costs, and potential shortages, could hit Greece’s economy this year.
IOBE, a think tank, has cut its forecast for Greek economic growth this year to 1.8%, down from 2.2%.
In a quarterly report released on Thursday, IOBE forecast that energy prices will remain elevated for months, driving Greek consumer prices higher and affecting domestic consumption along with tourism.
Tourism receipts will largely depend on how much the war hits visitors’ incomes or makes Americans think twice before travelling abroad, IOBE added.
US industrial production fell in March
American industrial output dropped last month – an early sign that higher energy price are hurting Donald Trump’s domestic economy.
Production at US factories, mines and utility companies fell by 0.5% in March, data from the Federal Reserve shows, including a 0.1% drop in manufacturing output.
Capital Economics told clients:
The 0.1% m/m fall in manufacturing output was a touch weaker than the 0.1% gain that we and the consensus expected.
While growth in February was admittedly revised up to 0.4%, from 0.2%, that only offset a similar-sized downward revision to growth in January.
Most of the weakness in March stemmed from a 3.7% m/m fall in motor vehicles & parts manufacturing, continuing its volatile run.
Wall Street’s main indexes have opened higher on Thursday on rising hopes that the worst of the Middle East conflict may have passed.
The Dow Jones industrial average has gained 119 points, or 0.25%, to 48,582.84 points.
The S&P 500 index, which hit a record high yesterday, is up 0.15%.
Huge Nigerian refinery ‘boosts jet oil supplies to Europe
A mega-refinery owned by Africa’s richest person is becoming an increasingly important source of vital jet fuel supplies to Europe, helping fill a gap left by the impact of the Iran war while boosting profitability, Bloomberg are reporting.
Aliko Dangote’s $20 billion plant in Nigeria reached full capacity just a couple of weeks before the conflict in the Middle East created a historic oil-supply disruption. Benefiting from local crude purchases that save cost, the upheaval in the market has given the billionaire a greater advantage amid deepening concerns about fuel shortages.
The 650,000 barrel-a-day facility, one of the world’s biggest, has raised its jet fuel shipments to Europe to unprecedented levels with prices in the continent recently hitting the highest on record. It marks a major turnaround for Nigeria that for years bought fuel from Europe, and leaves Dangote with room to raise supplies further just as European refineries face the prospect of cutbacks because of expensive crude and a lack of Middle Eastern supply.
“Given that Europe is particularly reliant on jet barrels via the Strait of Hormuz, we could expect to see a larger portion of Dangote’s jet exports heading towards Europe,” said Qilin Tam, head of refining at FGE NexantECA, who estimates the plant can make as much as 150,000 barrels a day of the fuel at full tilt.
