The global economy faces a “broad and deep shock” as disruptions linked to the Middle East war severely affect energy markets, commodity supply chains, and financial stability, according to the IMF’s Middle East and Central Asia Department Director Jihad Azour.
Speaking at the IMF Spring Meetings in Washington, Azour outlined the scale of the crisis centred on the Strait of Hormuz, through which roughly one-fifth of the world’s oil supply and a quarter of global LNG trade normally pass. Strikes and precautionary shutdowns have pushed the strait close to a standstill, cutting global oil and gas output by an estimated 13 million barrels per day.
Brent crude surged above $100 per barrel, peaking at $118 before easing after the ceasefire announcement. European gas prices climbed approximately 60 percent — exceeding the spike following Russia’s invasion of Ukraine.
The disruption extends well beyond oil. Roughly one-third of global fertiliser trade transits Hormuz, while Gulf states account for over 40 percent of global sulphur exports. Urea futures rose approximately 30 percent, with aluminium and phosphate prices up about 20 percent.
For oil-importing economies like Sri Lanka, vulnerabilities are intensifying as higher energy costs coincide with weaker remittance inflows from Gulf-based workers and tighter financial conditions. Sovereign spreads in several countries widened by 50 to 100 basis points during March.
Azour cautioned strongly against reinstating broad fuel subsidies, warning that untargeted measures would absorb scarce policy space. The IMF urged “disciplined agility” — deploying targeted, temporary support financed through reprioritised spending rather than increased deficits.
