IMF Warns Middle East Crisis Could Drive Oil to $130

The International Monetary Fund warns that a worsening Middle East crisis could drive global oil prices to US$130 a barrel by the fourth quarter of 2026. In its October 2026 World Economic Outlook, the organization projected that oil prices will average $95.74 a barrel for the year, representing a 41 percent increase from 2025. This surge is attributed to supply disruptions caused by the closure of the Strait of Hormuz.

The IMF scenario assumes the conflict persists through June 2027, keeping the straits of Hormuz and Bab el-Mandeb largely closed to commercial shipping. While global headline inflation is expected to rise to 4.7 percent in 2026, the net toll on global growth is estimated at 0.3 percentage points due to flexible supply responses. Energy-importing nations without technology sector gains face the most difficult conditions, including higher import costs and constrained fiscal space.

In Australia, economists estimate the price jump could increase petrol prices by 30 cents per litre, potentially pushing inflation to 4.5% by late 2026, exceeding the Reserve Bank of Australia's prediction of 3.6%. While some analysts argue this would force the central bank to hike interest rates, others suggest the bank remains focused on domestic capacity constraints. Meanwhile, the IMF noted that India's growth has remained robust despite higher oil prices.