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Economic shock of Middle East war to cast shadow over IMF, World Bank meetings

But economists are urging governments to use only targeted and temporary steps to ease the pain of higher prices for their citizens, since broader measures could fuel inflation.

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Top finance officials from around the world will convene in Washington this week under the shadow of the war in the Middle East, which has delivered a third major shock to the global economy after the COVID ​pandemic and Russia’s full-scale invasion of Ukraine in 2022, Reuters reported.

Top International Monetary Fund and World Bank officials last week said they would downgrade their forecasts for global growth and raise their inflation predictions as ‌a result of the war, warning that emerging markets and developing countries will be hit hardest by higher energy prices and supply disruptions.

Before the Iran war broke out on February 28, both institutions had expected to lift their growth forecasts given the resilience of the global economy – even in the wake of major tariffs imposed by U.S. President Donald Trump beginning last year. But the war has delivered a series of shocks that will slow progress on recovering growth and beating back inflation.

The World Bank’s baseline estimate now projects growth in emerging ​markets and developing economies of 3.65% in 2026, down from 4% in October, but sees that number dropping as low as 2.6% if the war lasts longer. Inflation in those countries was now forecast ​to hit 4.9% in 2026, up from the previous estimate of 3%, and could spike as high as 6.7% in the worst case.

The IMF warned last week that ⁠about 45 million additional people could also face acute food insecurity if the war persists and continues to disrupt fertilizer shipments needed now.

The IMF and World Bank are racing to respond to the latest crisis and support vulnerable ​countries at a time when public debt levels have reached record levels and budgets are tight.

The IMF said it expects demand for $20 billion to $50 billion in near-term emergency support to low-income and energy-importing countries. The World Bank has said ​it could mobilize some $25 billion through crisis response instruments in the near-term, and up to $70 billion in six months, as needed.

But economists are urging governments to use only targeted and temporary steps to ease the pain of higher prices for their citizens, since broader measures could fuel inflation.

“Leadership matters, and we’ve come through crises in the past,” World Bank President Ajay Banga told Reuters, lauding work on fiscal and monetary controls that had helped economies weather previous storms. “But this is a shock to the system.”

Countries now face a ​tough balancing act managing inflation while keeping an eye on growth and the longer-term challenge of creating enough jobs for the 1.2 billion people who will reach working age in developing countries by 2035, read the report.

IMF and World Bank also ​face a far different global landscape with tensions running high between the United States and China, the world’s largest economies, and the Group of 20 major economies hobbled in its ability to coordinate a response.

The United States currently holds the rotating presidency ‌of the ⁠G20, which also includes Russia and China, but it has excluded another member – South Africa – from participation, complicating the group’s ability to coordinate on this crisis.

“You’re trying to operate on consensus when there’s no consensus in the world right now on anything,” said Josh Lipsky, chair of international economics at the Atlantic Council.

Lipsky said statements by the IMF, World Bank and other multilateral lenders about their readiness to support countries hit hard by the war were clearly aimed at reassuring markets.

“It’s a signal to private creditors. This is not a time to flee countries that are in problematic waters. They will have support from the multilateral development banks and the international financial institutions. This is not going ​to be COVID. This is something that we can handle.”

Mary Svenstrup, a former senior U.S. ⁠Treasury official now with the Center for Global Development, said many emerging market and developing economies entered the crisis worse off than just a few years ago, with lower buffers, higher debt vulnerabilities and lower reserves.

“We need to have this crisis be a catalyst for IMF stakeholders to really rethink how the Fund supports vulnerable countries with the recognition that ​we’re going to be seeing more global shocks,” she said. “We can’t ask them to sacrifice growth and development for the sake of rebuilding buffers.”

Svenstrup said countries should ​pursue more ambitious reforms if ⁠they received fresh funds. “There probably does need to be more financial support from the (international financial institutions) but it needs to be affordable, and it needs to be in the context of reform programs and potentially broader debt relief,” she said.

Martin Muehleisen, a former IMF strategy chief who is now with the Atlantic Council, agreed, saying the IMF should work with donor countries to accelerate debt restructuring for borrowers and “get them off the debt cycle.” New lending should be tied to a credible ⁠debt-reduction road map, ​he said.

Eric Pelofsky, vice president at the Rockefeller Foundation, said low-income and lower middle-income countries paid twice the amount to service their debts ​in 2025 than before COVID, limiting funds for education, health care and other critical social programs. Half were now in or near debt distress, up from a quarter, just a few years ago, Reuters reported.

“This new conflict threatens any recovery that occurred since the pandemic or the Ukraine war, ​and it takes countries that have basically been treading water, trying to stay away from default, and keeps them in a long term debt-growth-investment trap,” he said.

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Norway will come under France’s nuclear umbrella, leaders say

Norway becomes the latest country to receive France’s nuclear protection, after Poland and Lithuania, which also share borders with Russia.

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Norway will open talks with France on joining its nuclear umbrella, French President Emmanuel Macron and Norwegian Prime Minister Jonas Gahr Stoere said on ​Wednesday, reflecting growing European concerns about relying on the United States for security, Reuters reported.

The move ‌signals a shift by Norway, long a staunch Atlanticist that has relied heavily on NATO and the U.S. nuclear umbrella, towards closer defence cooperation within Europe.

Macron and Stoere announced the plan at a meeting in Paris, where they ​also signed a broader defence agreement which includes Norway joining a French-led nuclear weapons initiative.

Stoere ​said Norway’s primary deterrence would remain the NATO alliance and the United States, but ⁠described France’s nuclear capabilities as “an important contribution” to the alliance’s overall posture.

“France’s capabilities are an important ​contribution to NATO’s deterrence posture, which is important for us,” Stoere said.

Under the plan, Norway would take ​part in what France calls “forward nuclear deterrence”, under which European partners are more closely involved in French strategic thinking on nuclear defence.

“This agreement establishes a principle of mutual assistance between our two countries,” Macron said, adding that deeper ​cooperation would support Europe’s ambitions for greater strategic autonomy.

The initiative comes as European countries seek to strengthen ​their own defence capabilities amid doubts about long-term U.S. commitments and heightened tensions with Russia.

In March, France offered to extend ‌the ⁠protection of its nuclear umbrella to other European countries which, in practice, means that an attack on a country could trigger a French nuclear response, read the report.

Norway becomes the latest country to receive France’s nuclear protection, after Poland and Lithuania, which also share borders with Russia.

Stoere told Norwegian news agency NTB earlier on Wednesday that ​no nuclear weapons will ​be deployed in Norway ⁠in peacetime.

The Nordic nation of 5.6 million inhabitants is a member of NATO, but not of the European Union, and shares a border with Russia ​in the Arctic.

“This closer cooperation will make European and transatlantic security stronger. ​Together, we are ⁠enabling a burden shift. It was long before Trump that this became necessary, that Europe had to pay more and do … wiser investments, not only country by country, but coordinated,” Stoere said.

Russia and the U.S. ⁠are the ​world’s biggest nuclear powers, with over 5,000 nuclear warheads each. ​China has about 600, France has 290 and Britain 225, according to the Federation of American Scientists.

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Chemical tank rupture in Washington state causes one death, multiple injuries

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A chemical tank imploded and ruptured at a Nippon Dynawave Packaging facility ​in the U.S. state of Washington on Tuesday, resulting in one death and nine ‌injuries, while nine others remained unaccounted for as of Tuesday night, authorities said.

A joint written statement with Nippon and the Cowlitz County Sheriff’s Department said a tank containing “white liquor,” a chemical solution of sodium hydroxide and sodium sulfide ​used in making paper pulp, had ruptured around 7:15 a.m. local time (1415 GMT), Reuters reported.

While the ​tank was initially believed to hold around 80,000 gallons (302,830 litres), officials later said ⁠it contained closer to 900,000 gallons of white liquor, with an estimated 90,000 gallons of material ​still inside the damaged tank.

Recovery efforts would resume on Wednesday at the site in the city of ​Longview in Cowlitz County, about 45 miles (72 km) north of Portland, Oregon, as the tank remained unstable, Longview Fire Department Battalion Chief Matt Amos said during a media briefing.

The injured, some critical, included eight employees of the facility ​as well as one firefighter, Amos said, adding that the firefighter had been treated and released.

Authorities ​had earlier said that multiple patients suffered from chemical burns.

Officials reiterated in the evening that the implosion posed “no ‌direct threat ⁠to the surrounding community.”

At the media briefing, Washington state Governor Bob Ferguson said: “It’s difficult always to find the words at a time like this … Our thoughts and our prayers are with everybody impacted by this tragedy.”

PeaceHealth St. John Medical Center in Longview told ABC News earlier in the day ​that six of the patients ​were in fair ⁠condition.

Nippon Paper Industries, Japan’s second-biggest paper manufacturer by sales, acquired the Longview plant from Seattle-based timber company Weyerhaeuser for $225 million and established the wholly-owned subsidiary ​Nippon Dynawave Packaging in 2016.

Japanese media reported that no injury was confirmed ​among Japanese employees, ⁠citing the Consulate-General of Japan in Seattle.

In southern California, meanwhile, authorities have been monitoring an overheating industrial tank containing highly flammable methyl methacrylate. The worst-case possibility of an explosion was ruled out on Monday at ⁠the GKN ​Aerospace facility in Garden Grove after a crack relieved ​some of the mounting pressure, officials said.

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Rubio says Iran deal could take days as US launches fresh strikes

Rubio told reporters in New Delhi earlier that the U.S. would give diplomacy every chance to succeed before considering whether to deal with Iran in “another way”.

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U.S. Secretary of State Marco Rubio said on Tuesday negotiating a deal with Iran could “take a few days,” quashing hopes for an imminent end to the conflict ​a day after U.S. forces conducted what Washington called defensive strikes in southern Iran.

Describing the strikes against targets including boats attempting to lay mines ‌and missile launch sites, Rubio said the Strait of Hormuz has to be open “one way or the other.”

“The straits have to be open, they’re going to be open one way or the other, so they need to be open,” Rubio told reporters on his plane in India’s Jaipur.

Despite a ceasefire in place since early April, U.S. Central Command said in a statement on Monday it had carried ​out fresh strikes designed “to protect our troops from threats posed by Iranian forces.”

Iran said on Monday it had downed a “hostile” stealth drone using a new air ​defence system, Iranian news agencies reported, without saying where it had come from.

The U.S. attacks came as Iran’s top negotiator and its ⁠foreign minister were in Doha for talks with Qatar’s prime minister on a potential deal with the U.S. to end the three-month-old war, an official briefed on the visit ​said.

Rubio told reporters in New Delhi earlier that the U.S. would give diplomacy every chance to succeed before considering whether to deal with Iran in “another way”.

He said there was ​a “pretty solid thing on the table,” referring to talks over reopening the strait and a “very real, significant, time-limited negotiation on the nuclear matter.”

In a lengthy post on Truth Social on Monday, U.S. President Donald Trump said talks with Iran were going “nicely”, but warned of fresh attacks if they failed. It “will only be a Great Deal for all, or no Deal at all,” he wrote.

In another indication of ​the region’s tensions, Israeli Prime Minister Benjamin Netanyahu said on Monday Israel would intensify strikes against the Iran-backed Hezbollah militia in Lebanon.

Israel’s military soon thereafter said it was ​attacking Hezbollah infrastructure in Lebanon’s eastern Bekaa Valley and other areas.

Israel and Lebanon agreed to a ceasefire in mid-April, but Israel has continued airstrikes it says are acts of self-defence against Hezbollah, ‌which was ⁠not party to the truce.

The official briefed on the Iranians’ Doha visit told Reuters the discussions focused on the Strait of Hormuz and Iran’s stockpile of highly enriched uranium, while Iran’s central bank governor attended to discuss the potential release of frozen Iranian funds as part of a final deal.

Iranian foreign ministry spokesperson Esmaeil Baghaei said earlier that nuclear issues would only be negotiated after the framework accord was agreed.

Trump has said his key aim in the war is to prevent Iran from developing a nuclear weapon ​with its highly enriched uranium. Tehran has ​consistently denied it has plans to do ⁠that.

Baghaei said the potential Iran deal contained no specific details on management of the Strait of Hormuz, through which about a fifth of the world’s oil and liquefied natural gas usually flows.

Iran would not charge tolls for ships to pass through but there ​would be a cost for services offered such as navigation and steps to protect the environment, he said, under a protocol ​to be agreed with ⁠Oman, which lies on the opposite shore of the waterway.

Citing a Middle East diplomatic source, Japan’s Nikkei newspaper reported the U.S. and Iran were discussing a plan to open the strait about 30 days after reaching a deal to end hostilities.

Since the U.S. and Israel launched strikes on Iran on February 28, only a few dozen vessels have been passing through the ⁠Strait of Hormuz ​compared with 125 to 140 daily previously.

The stand-off has caused a spike in oil prices and driven ​up the costs of fuel, fertiliser and food.

In early Asian trade on Tuesday, U.S. West Texas Intermediate crude was up slightly from Monday’s last traded price but down 5.5% from Friday’s close.

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