The International Monetary Fund (IMF) has warned that a prolonged war in Iraq could hit global financial markets hard. In its semi-annual Global Financial Stability Report, the IMF said the potential for a rebound in the economy and financial markets is "currently overshadowed by the intensified uncertainty about the prospect of war in Iraq and its repercussions on growth and stability". The report, which was drawn up before military action was launched against Iraq, also warned that even if the war proves to short and short and decisive, uncertainty is likely to persist.
"Indeed, even in the event of a quick and decisive military outcome, a major act of terrorism associated with the conflict - or seemingly independent of it - would still hurt financial markets," it said. Apart from the potential impact of the military conflict in Gulf, the IMF was relatively upbeat about the global economy, stating that the negative impact from the bursting of the asset price bubble "appears to be waning". //www.fxcentre.com