Growth held up through the Iran war, but the IMF says oil stocks are nearly used up and governments have little room to soften the next price shock.
The IMF's October World Economic Outlook says the global economy coped with the US-Iran war better than feared, with growth forecast at 3.1% this year and 3.4% in 2027. But it got there by draining emergency oil stocks, and the US strategic petroleum reserve is at its lowest since 1982.
With stocks low and many governments heavily in debt, the fund warns there is little room to protect consumers if energy prices jump again.
The IMF also says growth now leans heavily on the AI boom, with just 32 economies producing 95% of it. Its forecasts assume the Strait of Hormuz reopens in March 2027.
The world economy has come through a war that shut one of its most important oil routes in better shape than anyone expected. The bad news in the IMF World Economic Outlook 2026 is how it managed it: by burning through the emergency oil stocks that were supposed to protect us from the next shock.
That matters at the gas pump and on your energy bill. The International Monetary Fund says inventories are running down toward levels that could trigger sharp price jumps, and many governments are now too deep in debt to cushion households the way they did before. Its October report, titled “Resilience Under Strain, Urgent Choices”, amounts to a warning that the cushion is almost gone.
The IMF says emergency energy stocks are now depleted after being used to hold down prices during the US-Iran war. Oil supplies were rerouted away from the Strait of Hormuz, which before the war carried about a quarter of the world’s seaborne oil, and governments released strategic reserves to fill the gap.
Those moves worked. The International Energy Agency announced the largest emergency oil release in its history in March and pledged to speed it up after a meeting of oil ministers in September. Left unchecked, the IMF reckons the Hormuz shutdown would have knocked 0.9 percentage points off world growth this year, but rerouting, extra output elsewhere and stock drawdowns shrank the actual hit to about 0.3 points.
The cost is that the tanks are emptier. The US strategic petroleum reserve was recently reported to be at its lowest level since 1982. In the report’s words, without rebuilding supply and policy buffers, the world economy could soon “test the limits of resilience”.
Silvana Tenreyro, the IMF’s economic counsellor, made the same point when she launched the report in Bangkok, urging governments to “move from just coping, to rebuilding”.
The IMF raised its 2026 global growth forecast slightly, to 3.1% from 3% in July, and kept 2027 at 3.4%. That is still a slowdown from 3.5% in 2025. Here is how the main economies look:
The UK upgrade was welcome news for the chancellor, John Healey, who was due in Bangkok later that week. Several Gulf producers fared far worse: Bahrain, Iraq, Kuwait and Qatar are all expected to see double-digit contractions this year as war damage disrupts their energy exports.
The IMF says growth is being redistributed rather than simply slowing. Countries tied into the AI hardware supply chain and not heavily dependent on imported energy are doing best. Energy importers with little link to the tech boom, including many poorer countries, face higher import bills, weaker currencies and shrinking real incomes.
The concentration is striking. Just 32 economies now produce 95% of global growth, down from 54 in April. Roughly 47% of economies had their forecasts cut.
That makes AI a risk as well as a support. The IMF’s analysis suggests that if AI productivity gains disappoint and investment slows, global GDP could be around 1.1% lower by 2028, with deeper losses in the US and Asia. The fund flagged an AI-driven market crash as a continuing threat alongside the energy shock.
For households, the main message is that prices will stay high for longer. The IMF assumes oil will average $95.74 a barrel in 2026, about 41% above 2025, and $87.39 in 2027. Global inflation is forecast at 4.7% this year and 4.1% in 2027, a little higher for next year than the fund expected in July.
Core inflation, which strips out volatile food and energy, is not expected to get back to 2% until the end of 2027 in Britain and Japan, and not until mid-2028 in the US and euro area. That points to interest rates staying higher for longer too, which affects mortgages, car loans and credit card rates.
The bigger danger is a new shock with no buffer left. The IMF said risks are tilted to the downside, pointing to a drawn-out stalemate or new escalation in the Middle East, which would push up energy and food prices. Attacks on energy infrastructure, cyber attacks or extreme weather could make things worse. Without spare oil stocks, any of these would reach consumers faster.
Political fixes have limits. In early October, President Trump struck a deal with Vladimir Putin that briefly lets Russian diesel back into the US without sanctions, hoping to ease pump prices, a step analysts said would make little real difference.
The fund’s advice is to rebuild before the next crisis. IMF managing director Kristalina Georgieva told governments ahead of the meetings that they have the tools and should stop putting off action, a call to bring debts and deficits under control.
For central banks, the IMF urged them not to overreact to short-term jumps in inflation but to move quickly if price rises start to look entrenched. The forecasts rest on Hormuz opening again in March 2027 and things looking roughly as they did before the war by October 2027. If that slips, so do the forecasts.
The IMF expects the world economy to grow 3.1% in 2026, up slightly from 3% in its July update, and 3.4% in 2027.
It sees the UK growing 1.3% this year and 1.2% in 2027, and the US growing 2.3% in both years.
Countries released record amounts of emergency oil to keep prices down during the Middle East conflict, so there is far less left in reserve to absorb another supply shock.
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