Iran war disruptions will last after Hormuz Strait reopens

Countries affected by the Iran war should prepare for conflict-related disruptions to last for months, even if the current shaky ceasefire lasts and the Strait of Hormuz is reopened, World Bank President Ajay Banga said Wednesday.

“It’ll still take a few months for things to come back to where they were” once the key oil-shipping route is no longer choked off amid Iranian threats and a U.S. blockade, Banga told CNBC’s Karen Tso at the International Monetary Fund’s spring meeting.

“So we have to prepare for a few months of some destabilization for these countries,” he said.

Banga said that the World Bank has prepared a “war chest” plan to provide countries with varying levels of funding, depending on how long the conflict drags on.

“Thanks to our crisis toolkit, our countries can get about $20 to $25 billion immediate access, like literally tomorrow morning, without new approvals,” he said.

If the war continues for the next five or six months, that figure could rise to $60 billion, he said.

Over the next 15 months, the World Bank could amass $80 to $100 billion if needed, he said.

He noted that the bank only “put $70 billion to work” during the Covid-19 pandemic. “So I’m preparing a kind of a war chest of three types and three phased things to be able to cater to this,” he said.

Banga also said that he is advising World Bank clients affected by the war to focus on reining in inflation first.

“Make sure you get the inflation under control before you start worrying too much about getting back into worrying about the growth side,” Banga said. “You got to make sure that this gets managed.”