In Chapter 1 of its October 2026 World Economic Outlook, the IMF describes the war-induced supply shock as one of two major forces shaping the global economy, alongside the positive momentum generated by investment in technology and artificial intelligence. The two forces are pulling growth in opposite directions, with markedly different consequences for countries depending on their exposure to the conflict and their position in global technology supply chains.
The closure of the Strait of Hormuz disrupted a critical transit route through which about 20 million barrels of oil, or roughly a quarter of global maritime oil trade, flowed daily before the war. The disruption significantly reduced available supplies, but the impact on volumes was partly cushioned by adjustments elsewhere in the market.
Persian Gulf producers redirected some supplies through alternative ports, production outside the Gulf increased by 2 million barrels a day, and releases from global inventories supplied a further 4 million barrels. Even after these adjustments, however, balancing the market at higher prices required demand to fall by about 5 million barrels a day in the second quarter of 2026, the IMF said.
China, the world's largest oil importer, also contributed to the adjustment by reducing its crude oil imports by 23% between March and June 2026 compared with the same period a year earlier.
The experience highlights how supply flexibility and lower energy intensity have helped limit the initial damage. Over the past two decades, energy use per dollar of global GDP has fallen by 32%, while renewable sources have accounted for 60% of the increase in electricity production since 2010, according to the IMF chapter.
But these factors do not eliminate the risks. The Fund notes that inventory drawdowns and commercial and strategic destocking have provided temporary relief from reduced energy flows. Forward-looking indicators, including supply-chain pressures and manufacturing purchasing managers' indices, point to softer momentum ahead.
The effects are also uneven across countries. Energy exporters outside the conflict zone can benefit from higher prices, while energy-importing economies with limited participation in the technology boom face a more difficult combination of higher input costs and weaker activity. Countries already facing fiscal and external vulnerabilities have less room to absorb the shock.
Higher energy prices can also feed into food and transport costs, complicate efforts to bring inflation down and constrain household purchasing power. If disruptions persist, the consequences could extend beyond the immediate oil market into investment, trade and financial conditions.
For policymakers, the challenge is to contain inflation without unnecessarily weakening economic activity, while preserving fiscal resources to respond to further shocks. The IMF also points to the importance of energy security, stronger policy frameworks and international cooperation.
The central risk is that an economy which has so far absorbed much of the initial shock could face greater strain as temporary buffers diminish and the disruption works its way through production and prices.