The International Monetary Fund has issued a stark warning that the ongoing conflict in the Middle East could lead to significantly higher inflation and a sharp slowdown in global economic growth.

In an emergency assessment, the IMF projected that a prolonged disruption of oil supplies through the Strait of Hormuz could push global inflation up by 2 to 3 percentage points and reduce worldwide GDP growth by as much as 1.5% over the next year.

"We are looking at a scenario that could set the global economy back significantly," said the IMF Managing Director. "The economic consequences of this conflict extend far beyond the region directly affected."

The fund identified developing nations as the most vulnerable, warning that higher energy and food prices would disproportionately impact countries already struggling with debt and poverty. Central banks worldwide would face the difficult choice of raising interest rates to fight inflation while risking recession.

Financial markets reacted sharply to the assessment, with global stock indices falling and oil futures climbing further.