Russia's military offensive in Ukraine, and the subsequent sanctions imposed on Moscow as a result, will have a "severe impact" on the global economy, according to the International Monetary Fund.
The continuing conflict has already driven up energy and commodity prices, adding inflationary pressures from supply chain disruptions and sending a wave of more than one million Ukrainian refugees to neighbouring countries, the Washington-based lender said in a statement on Saturday, report agencies.
"Price shocks will have an impact worldwide, especially on poor households for whom food and fuel are a higher proportion of expenses. Should the conflict escalate, the economic damage would be all the more devastating," she said.
"The sanctions on Russia will also have a substantial impact on the global economy and financial markets, with significant spillovers to other countries."
The Russia-Ukraine crisis has already pushed oil prices to multi-year highs, raising transport costs, worsening already high inflation levels, driving up the prices of basic goods and denting the tentative growth of a global economy that was just recovering from the Covid-19 pandemic and potentially tipping some countries into a recession.
Oil surged on March 4, ending the week at multi-year highs as the conflict intensified and oil buyers shunned barrels from the world's second-largest exporter of crude.
Brent, the global benchmark for two thirds of the world's oil, rallied 6.9 per cent to $118.11 per barrel at the close of trading on Friday. West Texas Intermediate, the gauge that tracks US crude, was 7.4 per cent higher at $115.68.
The world could be on the brink of an energy crisis rivalling the 1970s, according to Daniel Yergin, vice chairman of IHS Markit and a renowned author and energy market historian.
“This is going to be a really big disruption in terms of logistics, and people are going to be scrambling for barrels,” Mr Yergin said last week. “This is a supply crisis. It’s a logistics crisis.
It’s a payment crisis, and this could well be on the scale of the 1970s.”
An Iran nuclear deal, which some believe could be a pressure valve, as the country's oil comes back online, will only provide temporary respite.
"If energy traders believe an Iran nuclear deal is imminent, whatever dip we see in crude prices might be short-lived. Iran claims they will be able to ramp up production quickly, but the potential disruptions of Russian supplies is too big of a shock for energy markets," said Edward Moya, a senior market analyst at Oanda.