• Global oil prices are running about 3% above the IMF's April baseline, with disruptions from the Iran conflict curbing roughly 14 million barrels per day of production.
  • The reopening of the Strait of Hormuz is a pivotal swing factor for price trajectories.
  • Global oil reserves are projected to fall to a five-year low of 7.5 billion barrels in July, from 8 billion before the conflict began.

Oil Markets Under Pressure

The International Monetary Fund has flagged a significant risk to global oil markets from the ongoing conflict with Iran, estimating that prices are already about 3% above the levels used in its April global growth baseline of 3.1%, according to people familiar with the IMF's latest analysis.

Iran-related disruptions have curtailed roughly 14 million barrels per day of production, the IMF estimates. The price outlook remains heavily tied to the reopening of the Strait of Hormuz, a critical chokepoint through which about 20% of global oil passes. Without a reopening, prices could spike further.

Global oil reserves are expected to fall to a five-year low of 7.5 billion barrels in July, down from 8 billion barrels before the conflict began. The tighter supply picture raises the risk of higher energy costs spilling over into inflation and slowing economic growth.

Broader Economic Implications

Higher oil prices could complicate central banks' efforts to tame inflation without derailing growth. "The oil-shortfall scenario implies higher energy costs, upward pressure on inflation, and a potential drag on GDP," an IMF official told Reuters, speaking on condition of anonymity. The IMF is expected to release updated growth and inflation forecasts in its next World Economic Outlook.

What's Next

Markets are watching for any diplomatic progress that could reopen the Strait of Hormuz or ease sanctions on Iranian oil. In the meantime, the IMF's warning underscores the fragile state of global energy supply and the potential for further volatility. We will update this story as more details emerge.

Correction: An earlier version of this article misstated the production curtailment figure. It is 14 million barrels per day, not cumulative.