Despite the sharp rise in energy prices following the conflict in West Asia, global oil markets managed to avoid a prolonged supply shock, with crude prices stabilizing between $90 and $100 per barrel. According to the International Monetary Fund (IMF), several factors helped prevent a major disruption, even though more than 1.1 billion barrels of crude oil—equivalent to roughly 10 days of global consumption—had not reached the market by the end of May.
The IMF identified three key factors that helped cushion the impact. The first was reduced demand, particularly across Asia, where several economies shifted toward alternative energy sources such as coal and renewables. While transportation fuel demand remained relatively steady due to subsidies, fuel price caps, and tax rebates, overall energy consumption declined enough to ease pressure on global supplies.
The second factor was higher production from other oil-producing nations. As output from Gulf countries declined, producers including the United States, Venezuela, Guyana, and Russia increased production, adding nearly 2 million barrels per day compared to 2025 levels. This additional supply helped offset a significant portion of the shortfall.
The third shock absorber was the use of global oil inventories. The estimated supply deficit of around 4 million barrels per day between March and May was largely covered by drawing from commercial stockpiles, particularly in China, along with strategic petroleum reserves maintained by several countries.
However, the IMF cautioned that the situation remains fragile as tensions involving the United States and Iran continue. The restoration of normal shipping through the Strait of Hormuz remains uncertain, and even after a full reopening, industry estimates suggest it could take two to three months for oil flows, shipping operations, and insurance services to return to normal levels.
The report also warned that prolonged production shutdowns could result in permanent output losses, especially in regions where restarting oil wells becomes financially difficult due to limited investment.
Looking ahead, the IMF stressed that rebuilding oil inventories should be a priority to improve resilience against future supply disruptions. It also highlighted the need to diversify energy sources and transportation routes, reducing the world’s dependence on a single strategic chokepoint. Expanding renewable energy, maintaining flexible energy markets, and providing targeted, temporary support to vulnerable consumers were identified as key policy measures.
According to the IMF, while the global energy system has demonstrated remarkable resilience during the recent crisis, its ability to absorb future shocks is becoming increasingly limited. A lasting diplomatic resolution between the United States and Iran would play a crucial role in restoring stability to global energy markets and ensuring a more secure supply outlook.
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