In a blog post published on Wednesday, IMF economists Jean-Marc Natal and Azim Sadikov revealed that despite the virtual closure of the world's most critical oil chokepoint, which cut off approximately 20 million barrels of crude and refined products per day, crude prices have surprisingly settled within a moderate range of $90 to $100 per barrel.
However, the economists cautioned that the room to manoeuvre has largely been exhausted, leaving the global economy highly vulnerable to subsequent shocks unless immediate efforts are made to replenish depleted reserves and diversify supply routes.
The blockading of the Strait of Hormuz, which usually handles a fifth of global petroleum consumption, represents the largest disruption to the global oil market in decades. By the end of May, more than 1.1 billion barrels of crude, equivalent to roughly 10 days of typical global demand, had failed to reach the market, surpassing the supply shortfalls of the 1973 oil shock, the Iran-Iraq War, and the Gulf War.
The regional escalation has intensified over the past few days over the Strait of Hormuz, a strategic shipping route that normally handles around one-fifth of global seaborne crude oil and liquefied natural gas (LNG) trade.
The escalation briefly pushed benchmark Brent crude above $84 a barrel in early Tuesday trading, its highest level in a month, though prices remained well below the nearly $120 reached during the peak of the Iran-Israel conflict. Higher oil prices could increase energy and transportation costs worldwide, adding to inflationary pressures.
While Gulf producers attempted to mitigate the crisis by rerouting supplies, such as Saudi Arabia utilizing its Red Sea pipeline to Yanbu and the United Arab Emirates pushing its Fujairah port to near capacity, these workarounds offset only a minor fraction of the lost volumes.
Regional production of refined products, particularly diesel and jet fuel, also declined sharply, disrupting about 10 percent of global supply.
To absorb an estimated market deficit of approximately 4.0 million barrels per day between March and May, the global energy system relied on three distinct shock absorbers.
First, demand compression did the heavy lifting, especially in Asia, where higher prices drove a shift toward coal and renewables.
Transport demand, however, remained relatively resilient because of fuel price caps, subsidies, and tax rebates, although these measures increased fiscal costs.
Second, crude output outside the Gulf rose by nearly 2 million barrels per day compared to 2025 levels, led predominantly by the US alongside increases from Venezuela, Guyana, and Russia. Finally, the remaining deficit was covered almost entirely by drawing down global stocks, including commercial inventories in China and strategic reserves.
While a recent US-Iran framework agreement to reopen the strait has eased price pressures on expectations that stranded oil on tankers could quickly hit the market, the IMF warns that a full recovery will not be instantaneous.
Industry estimates suggest it will take two to three months for significant oil flows to resume, even after the waterway is fully reopened, as shipping, insurance, and operator confidence must first be restored. Furthermore, prolonged halts in production could trigger permanent output losses in areas where restart financing is scarce.
The authors warned that whenever supply begins to recover, the oil deficit will close only gradually, drawing inventories closer to operational minimums below which the physical distribution system itself begins to bind.
Looking ahead, the IMF highlighted critical policy takeaways to prepare the global economy for future energy crises, emphasizing first and foremost that rebuilding and maintaining robust oil inventories is essential to cushion future unexpected supply shocks.
Additionally, the economists stressed that relying on a single transit route leaves the global economy heavily exposed, making the diversification of transit paths and the transition to renewable energy equally important.
Finally, the fund advised that financial relief and subsidies designed to protect consumers must be temporary and targeted specifically to the most vulnerable, thereby preserving government budgets while maintaining the price signals that encourage energy efficiency and saving.
The IMF has recently revised Egypt's FY2025/2026 growth projection upward to 4.6 percent. This resilient outlook was supported by strong policy actions that cushioned the economy from Middle East conflict fallout. Additionally, a staff-level agreement for the seventh EFF review was reached in June 2026, which will unlock $1.64 billion pending board approval.
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