The International Monetary Fund (IMF) warned on Wednesday that high oil prices could continue through 2027, even if the conflict in the Gulf ends soon. IMF Managing Director Kristalina Georgieva said that crude remains around $100 a barrel, while constraints on refining and natural‑gas supplies are contributing to inflation and weighing on global growth.
Georgieva noted that a structural shortage of refining capacity has pushed the crack spread to about another $100 a barrel, leading to record retail prices for diesel and other refined products. Natural‑gas supplies from the Gulf are also severely impaired because LNG transportation options are limited while shipping through the Strait of Hormuz remains threatened.
Higher energy costs ripple into fertilizers, food and key industrial inputs, and the IMF added that El Niño is adding extra pressure on food security. The combination pushes inflation higher while dampening economic growth. The agency warned that colder weather in the Northern Hemisphere could further increase demand and push prices higher as countries replenish reserves.
The energy shock is one of three major forces shaping the world economy, the others being the rapid expansion of artificial intelligence and record levels of public debt. Georgieva said the global economy is being pulled simultaneously by a negative energy supply shock and a positive demand shock from AI, with sharply different consequences across countries.
Higher energy prices are also affecting financial markets and monetary policy, putting upward pressure on inflation, interest rates and benchmark government bond yields. U.S., German and Japanese 10‑year sovereign yields have risen sharply this year and are at their highest levels since 2007, 2009 and 1996, respectively. The IMF’s World Economic Outlook, due next week, will show the largest growth hits this year in economies affected by war, with smaller losses in vulnerable, energy‑dependent countries that have limited policy space.
The IMF and World Bank Annual Meetings will bring together finance ministers and central bank governors from the IMF’s 191 member countries in Thailand next week.
