Shock Absorbers

Source details

Oil prices have risen sharply with the latest war in the Middle East.
The effective closure of the Strait of Hormuz, a route for about a quarter of seaborne oil trade, represents a major global supply shock.
The damage from the shock will depend largely on how long the disruption lasts.
Oil markets were well supplied heading into the disruption, strategic stock releases added barrels, and buoyant financial markets helped limit broader tightening in financial conditions.

Energy efficiency
- The world economy is far more energy efficient than it was 50 years ago.
- Each dollar of output now requires roughly half as much energy as it did in 1980.
Fuel diversification
- The energy system is more diversified than in the past.
- Oil’s share of the mix has fallen from about half in 1973 to less than a third today.
- Oil remains the world’s leading fuel, but it no longer dominates.

Severity at the country level depends on:
- How much oil an economy imports.
- How much policy space its government has to respond.
More than 80 percent of countries are net oil importers.
Many of the most vulnerable countries entered this episode with limited room in public budgets to shield households and businesses.
The same global shock can become a much harsher national one where import dependence is high and policy space is thin.

This article draws on an April 9, 2026, speech by IMF Managing Director Kristalina Georgieva.
ANDREW STANLEY is on the staff of Finance & Development.
June 2026; F&D Magazine.

From: "Shock Absorbers" by Andrew Stanley, F&D Magazine, June 2026.