Strait closure removed 1.1 billion barrels in three months
The International Monetary Fund warned Wednesday that the global economy no longer has the buffer that kept oil prices from spiking during the first months of the Iran conflict, as renewed U.S. strikes on Iran and a blockade of Iranian ports pushed crude prices higher and drained the reserves that had stabilized energy markets.
The fund said the closure of the Strait of Hormuz since late February removed more than 1.1 billion barrels of crude from the market between March and the end of May — a larger disruption than those seen during the 1973 oil embargo, the Iran-Iraq war in the 1980s, and the 1990–1991 Gulf War. The shortfall was equivalent to roughly 10 days of global consumption.
Despite the scale of the disruption, oil prices did not climb as sharply as historical parallels would have predicted, the IMF said. The fund attributed the muted price response to a combination of factors: a decline in global demand of 5.8 million barrels a day spurred by the initial price rise, increased production of 1.7 million barrels a day from the U.S., Venezuela, Guyana, and Russia, and the drawdown of strategic reserves held in China and elsewhere.
“What cushioned the initial blow this time is that energy markets had room to maneuver and absorb it,” the IMF said in a blog post. “As tensions flare again in the Strait of Hormuz, that room is now smaller and shrinking further as spare capacity has been deployed, demand has compressed, and inventories have been drawn down.”
The fund last week forecast that the global economy would expand by 3% in 2026, down from the 3.1% it projected in April and from the 3.5% recorded in 2025. The IMF warned that growth could be weaker if the Middle East conflict escalates — a development that has since materialized. U.S. strikes that resumed last week in response to Iranian attacks on shipping continued Tuesday, and a U.S. blockade of Iranian ports and shipping restarted Tuesday afternoon, the fund said. The collapse of a ceasefire agreed to in June has delayed the full reopening of the strait and pushed oil prices higher, though not to the levels seen at the start of the war.
“A quick supply recovery is essential to avoid further damage to the global economy,” the IMF said.
The fund cautioned that the reserves that absorbed the initial shock must be rebuilt ahead of any fresh interruption. “Unless inventories are replenished, the world will start from a weaker position when the next shock comes,” the IMF said. It also said that expanding renewable energy would help insulate the global economy from future disruptions to key oil shipping routes.