The IMF expects oil prices to average $95.74 per barrel in 2026 before easing to $87.39 in 2027, according to its October 2026 World Economic Outlook (WEO), titled Resilience Under Strain, Urgent Choices.
Even with the expected decline, the 2027 average would remain above the pre-war 2025 level of $67.74 per barrel.
The IMF assumes the Strait of Hormuz will reopen in March 2027, with conditions returning broadly to pre-war levels by October 2027. This implies a gradual restoration of production, shipping, insurance, and payment arrangements, rather than an immediate normalization of energy flows, it noted.
The report highlights the impact of geopolitical tensions and energy supply disruptions on commodity markets. It says alternative export routes, higher production outside the Gulf, and inventory releases have helped soften the effects of the disruption.
The closure of the strait caused a major supply shock. About 20 million barrels per day, roughly a quarter of the world’s seaborne oil trade, passed through it before the war. Prices peaked at $126 per barrel in late March.
However, supply proved flexible, which limited the volumes lost. Producers redirected some supply to other ports, and production outside the Gulf, including in Brazil, Kazakhstan, the US, and Venezuela, rose by 2 million barrels per day (mmbbl/d). Releases from global inventories supplied a further 4 mmbbl/d.
Even so, balancing the market at the higher prices implied a demand drop of about 5 mmbbl/d in the second quarter (Q2) of 2026.
China, the world’s largest oil importer, helped absorb some of the adjustment. Its crude imports fell 23% between March and June 2026 from a year earlier, as it drew on its large domestic inventories and cut refined product consumption.
“This reflects greater energy efficiency and a shrinking share of energy-intensive activities in the economy, at least until recently, as well as a diversification of energy sources away from fossil fuels, driven primarily by electrification and greener electricity production,” the IMF said.
The fund noted that energy use per dollar of global gross domestic product (GDP) has fallen by 32% over the past two decades, thanks to the rise of renewables. It added, however, that it is unclear whether this trend will continue, given demand pressure from AI data centers.
Despite that relief, prices rose again as escalating tensions in the Red Sea and the Black Sea affected the refining of petroleum products. Refinery outages and damage in the Gulf and Russia have removed about 20% of international refined product supply, the IMF said.
It also warned that falling inventories and the risk of further disruptions leave the oil market vulnerable to additional price spikes. “Because of these supply shortages, global reserves continue to be depleted by about 2.7 mmbbl/d and are rapidly reaching stress levels that could lead to nonlinear price adjustments,” it said.
If the conflict lasts through June 2027, with the Strait of Hormuz and Bab el-Mandeb largely closed, the IMF sees prices reaching $130 per barrel in Q4 of 2026 and Q1 of 2027, before returning to the baseline by the Q4 of 2027.
