IMF Managing Director Kristalina Georgieva warns that surging oil prices threaten to push the global economy into a recession. Crude oil has climbed nearly 45% in three months, largely due to the ongoing U.S.-Iran war disrupting the vital Strait of Hormuz. The International Energy Agency notes rapidly depleting inventories could drive prices higher. The IMF’s worst-case scenario sees oil averaging $110 per barrel this year, with global GDP growth slowing to 2%.
International Monetary Fund Managing Director Kristalina Georgieva stated that surging oil prices are putting the global economy at risk of a recession. Crude oil prices have increased by nearly 45% over the last three months, largely due to the ongoing war between the U.S. and Iran.
The Strait of Hormuz, accounting for roughly one-fifth of global oil movement, has experienced intermittent closures since the conflict began. Both nations have been attempting to take control of this critical maritime choke point.
Georgieva warned that if oil prices remain between $120 and $130 per barrel through 2027, a technical recession could occur. At the time of writing, oil prices were at $106.84, according to the provided data.
The International Energy Agency indicated there is a solid chance prices could rise further this summer due to rapidly depleting inventories. Its May report noted global oil supply declined by a further 1.8 million barrels per day in April.
The report stated, “More than ten weeks after the war in the Middle East began, mounting supply losses from the Strait of Hormuz are depleting global oil inventories at a record pace.” Total supply losses have reached 12.8 million barrels per day since the conflict started on February 28.
Last month, the IMF also cautioned that a prolonged war could trigger a recession. In its worst-case scenario, the fund projects oil will average $110 per barrel this year with global GDP growth of just 2%.
The IMF said, “The global outlook has abruptly darkened following the outbreak of war in the Middle East.” Brent crude oil has surged 41% to $108 since the conflict’s onset as the stalemate continues.
In the United States, rising oil prices have translated into higher costs for consumers. Gas prices are climbing across the country, surpassing $4 per gallon in many areas.
Hawaii remains the only state where prices have exceeded the $5 mark, reaching $5.6 per gallon. Other U.S. states are not far behind this elevated price level.
