By Maha El Dahan, Yousef Saba and Nadine Awadalla

RIYADH The head of the International Monetary Fund (IMF) on Wednesday said the war between Israel and Hamas was another cloud on a horizon with plenty of them, warning that the global economic outlook could worsen.

"What we see is more jitters in what has already been an anxious world," Kristalina Georgieva told an audience at the FII investment conference in Riyadh.

"And on a horizon that had plenty of clouds, one more - and it can get deeper."

Dubbed "Davos in the desert", the conference has drawn senior finance industry figures, many of whom have already struck a pessimistic tone about the global economy.

An event traditionally focused on cutting deals has been overshadowed by Israel's intensifying bombardment of Gaza, following an attack by militant group Hamas inside Israel. Thousands have been killed on both sides.

On Tuesday, JPMorgan Chase boss Jamie Dimon encouraged Saudi Arabia not to abandon a United States-led initiative to establish official relations with Israel.

Georgieva said the IMF's first concern was "the tragic loss of life" at the war's epicentre, though more widespread impacts were already apparent.

Long-term consequences included children being forced out of school, as well as the impact on neighbouring countries' tourism sectors.

"Egypt, Lebanon, Jordan. There, the channels of impact are already visible," she said. "Uncertainty is a killer for tourists inflows. Investors are going to be shy to go to that place."

Commenting on the sharp rise in interest rates, Georgieva said the world had been living in the "fantasy lane" for nearly 20 years.

"We are not thrilled with going from zero to five so quickly, but we are there," she said, referring to the U.S. Federal Reserve's main policy rate.

"So now ... our call to everybody is: buckle up. Make sure that you understand interest rates are here to stay for longer."

(Reporting by Maha El Dahan, Yousef Saba and Nadine Awadalla; Editing by Bernadette Baum and John Stonestreet)