Summary
International Monetary Fund managing director Kristalina Georgieva says the Middle East war has triggered the worst disruption in global energy supply in recent history, shuttering millions of barrels of oil production as Iran blocks the Strait of Hormuz. She told Reuters that the conflict has reduced global oil supply by around 13%, and that even if hostilities end quickly the IMF will cut its global growth forecast and raise its inflation outlook. Before the war the Fund expected global growth of about 3.3% in 2026 and 3.2% in 2027, but Georgieva now warns that "all roads lead to higher prices and slower growth" as energy and fertiliser shortages ripple through world markets.
The Strait of Hormuz normally carries one?fifth of the world’s oil and gas shipments, so the blockade has immediate consequences not just for fuel but also for farm inputs like fertilisers and chemicals. Energy supply disruptions are already raising production and transport costs around the world. Georgieva said poor, energy?importing countries will be hardest hit because they lack fiscal space to subsidise fuel and food. Some energy exporters, such as Qatar, have also suffered after strikes damaged production facilities that will take years to repair, and the International Energy Agency reports that dozens of energy sites have been damaged in the war. Broad subsidies are not the answer, she cautioned, urging governments to avoid measures that could further stoke inflation.
Even a rapid end to fighting will mean a downward revision to growth and an upward revision to inflation, according to the IMF. A protracted conflict would have larger effects and could push more countries to seek IMF assistance. The Fund is preparing a range of scenarios for its World Economic Outlook, all of which assume slower growth and higher inflation than previously expected. Georgieva said the IMF is working with the World Food Programme and the FAO to monitor food security, noting that food prices could rise if fertiliser deliveries remain disrupted.
For households and investors, the IMF’s warning underscores the need to prepare for persistent inflation and economic volatility. Building emergency savings, reducing discretionary spending and considering inflation?protected investments can help preserve purchasing power. Businesses should examine their energy use and supply chains to ensure resilience, and policymakers will likely focus on targeted support for vulnerable households while accelerating investment in clean energy and infrastructure to reduce future shocks. With uncertainty elevated, staying informed and adapting financial plans to changing conditions will be essential in the months ahead.
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