The International Monetary Fund (IMF) has warned that prolonged disruption to global oil supplies could trigger further price shocks, as the war in the Middle East threatens shipments through the Strait of Hormuz and depletes global reserves.
In its October 2026 World Economic Outlook, the Fund projects oil prices to average $96 (Sh12,456) per barrel in 2026 before easing to $87 (Sh11,288) in 2027. This reflects market assumptions and an expected gradual recovery in energy supplies.
The IMF says the outlook remains vulnerable to renewed hostilities, with the global oil market under pressure from supply shortages and attacks on energy infrastructure.
“Global reserves continue to be depleted by about 2.7 mb/d and are rapidly reaching stress levels that could lead to nonlinear price adjustments,” the report says.
The Fund notes that oil prices peaked at $126 (Sh16,349) a barrel in late March after shipments through the Strait of Hormuz nearly halted, disrupting about 20 per cent of global oil supply.
Prices subsequently fell to $68 (Sh8,823) a barrel in June after a temporary reopening of the strategic waterway and the release of about 90 million barrels of oil that had accumulated in the Gulf during its closure.
However, the improvement proved short-lived as the ceasefire gave way to continued low-intensity conflict, with threats spreading to the Red Sea and putting additional exports at risk.
IMF says crude oil exports from the Gulf averaged 16.7 million barrels a day in September, equivalent to 88% of pre-war levels. Despite the recovery, it warns that the market remains tight and geopolitical risk premiums elevated.
The Fund's baseline outlook assumes the Strait of Hormuz will reopen in March 2027, with shipping conditions broadly returning to pre-war levels by October. Brent futures indicate prices could return to about $79 (Sh10,250) a barrel by the end of 2027 as supplies gradually recover.
But the IMF warns that a more severe scenario, in which oil prices remain at $130 (Sh16,868) a barrel through the first quarter of 2027, could weaken global growth further and intensify inflationary pressures.
It also cautions that the economic impact depends on what drives price increases. Actual supply disruptions can have more persistent effects on inflation and unemployment than geopolitical fears that do not result in physical shortages.
The report introduces a Commodity Price Tracker to help policymakers distinguish between demand changes, actual supply disruptions and geopolitical risks as they unfold.
The IMF says understanding these differences is critical to shaping appropriate policy responses, as treating every increase in energy prices as evidence of physical scarcity could lead to ineffective decisions.