The International Monetary Fund (IMF) has declared that the global financial system has demonstrated notable resilience in the face of the ongoing Middle East conflict, even as it warned that underlying vulnerabilities could amplify stress if conditions deteriorate further.
IMF Financial Counsellor and Director of the Monetary and Capital Markets Department, Tobias Adrian, presenting the findings at a press briefing during the IMF and World Bank Spring Meetings in Washington, said the Middle East conflict had generated bouts of volatility but not the kind of sustained drawdowns seen in previous liquidity crises, with markets continuing to function in an orderly manner.
“Financial markets are being challenged by the war in the Middle East. The financial system has been resilient so far… the banking system is not a worry at this point,” Adrian stated.
He noted that liquidity facilities deployed by central banks, alongside structural improvements such as central clearing systems, had helped markets maintain orderly functioning through the turbulence.
The April 2026 Global Financial Stability Report (GFSR), released on April 14, nonetheless cautioned against treating current stability as a guarantee. Adrian warned that high sovereign debt, growing leverage outside the banking system, and shifts in market structure expose vulnerabilities across bond markets, funding markets, and risk assets, and that global financial conditions could tighten more if the conflict persisted.
On emerging markets, Adrian said capital flows to sub-Saharan Africa had reacted strongly to the conflict, with movements roughly twice as large as those recorded during the early stages of the Ukraine crisis, though price reactions remained relatively contained, reflecting broadly healthy global risk appetite. In Asia, economies heavily dependent on oil and food imports face heightened vulnerability, with the IMF recommending targeted support for low-income households alongside macroeconomic stabilisation measures.
Adrian stressed that the policy space available to governments to respond to future shocks has narrowed significantly, noting that over the past five or six years governments had repeatedly drawn on that space to support financial stability, leaving many countries with reduced room to manoeuvre.
On the steps policymakers should take, Adrian said governments needed to be prepared to support market functioning if stress intensifies, that credible macroeconomic frameworks matter particularly for emerging markets, and that oversight must keep pace with changes in the financial system as non-bank financial intermediaries play a larger role.
Egypt was cited as a positive example of how exchange rate flexibility and tighter monetary policy can build resilience ahead of external shocks.
