Four global economic bodies warn Middle East war threatens 21% of oil

The heads of the IMF, World Bank, IEA and WTO warned the Middle East conflict is draining global oil inventories at a record pace, threatening fuel security ahead of peak summer demand in the Northern Hemisphere.

"The war in the Middle East is generating substantial and highly asymmetric impacts on energy supplies, food security and economic activity across countries and regions," the four institutions said in a joint statement May 28.

The Strait of Hormuz handles about 21% of global oil trade, and the loss of supply through the waterway has triggered a record drawdown of inventories, the statement said. Higher fuel and fertilizer prices are disproportionately affecting the most vulnerable countries, with fertilizer costs a particular concern as many nations enter the planting season.

If shipping flows do not return to normal, continued rapid depletion of inventories ahead of peak summer demand would present increasing risks for fuel security and broader economic resilience, the institutions said. The four bodies said they are coordinating support to affected countries and tracking government policy responses.

The joint statement — signed by the heads of the International Monetary Fund, World Bank, International Energy Agency and World Trade Organization — reflects mounting concern that the conflict's economic fallout is widening beyond the immediate region. The last time these four institutions issued a coordinated warning on energy security was during the 2022 Russia-Ukraine war, when oil prices surged past $120 a barrel and global food prices hit record levels. That crisis triggered a wave of central bank tightening as policymakers struggled to contain inflation, with the Federal Reserve raising rates by 525 basis points over 16 months.

The current conflict has already reshaped trade flows. The war against Iran has disrupted shipping through the Strait of Hormuz, a chokepoint that typically carries about 21 million barrels of oil per day. The IEA has warned that the loss of supply is depleting global inventories at a pace not seen in decades. For oil-importing nations in Asia and Europe, the disruption threatens to push energy costs higher just as economies are recovering from the previous inflation cycle. The impact on fertilizer prices adds another layer of risk, as higher input costs could reduce crop yields and push food prices higher — a dynamic that would hit emerging markets hardest.

For developing economies, the risks are acute. The IMF's latest Article IV consultation with The Gambia, released in May, noted that the war is expected to "affect significantly the macroeconomic outlook and amplify domestic risks" for the West African nation, where inflation remains above the central bank's 5% target. Higher commodity prices from the conflict have started to emerge in consumer prices, the fund said. The Gambia, like many low-income countries, faces a dual shock of higher fuel import costs and elevated fertilizer prices that threaten agricultural output. The IMF has already extended The Gambia's $102.2 million ECF arrangement by six months to July 2027, with an additional $17 million in access to help address challenges stemming from the war.

IMF Extends Financing as Trade Measures Mount

The four institutions said they are monitoring fertilizer supply chains, energy markets and government policy responses to promote transparency and identify emerging risks. The statement follows separate actions by individual bodies — the IMF has extended financing arrangements for conflict-affected countries, while the WTO is tracking trade-restrictive measures that could compound the economic damage.

The coordinated warning indicates the institutions expect the economic effects of the war to persist. With peak summer oil demand approaching in the Northern Hemisphere and no resolution to the conflict in sight, the risk of further price spikes remains elevated. The joint statement serves as a precursor to potential coordinated policy action, similar to the 2022 collective release of strategic petroleum reserves by IEA member countries. For investors, the key question is whether the disruption proves temporary or becomes structural — a distinction that will determine whether oil prices settle higher once the conflict ends.

This article is for informational purposes only and does not constitute investment advice.