Jul 17, 2026
Oil markets won’t be able to absorb another blow to supplies if conflict with Iran resumes in the near-future, according to the International Monetary Fund.
The IMF said markets had depleted a trio of “shock absorbers” that kept crude prices from skyrocketing to record-setting levels.
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Brent crude, the global benchmark, was trading at $85 per barrel on Wednesday. It was the highest level in nearly a month and prices could surge again in the near-future.
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“As tensions flare again in the Strait of Hormuz, that room is now smaller and shrinking further as spare capacity has been deployed, demand has compressed, and inventories have been drawn down,” the IMF said in a blog post. “Unless inventories are replenished, the world will start from a weaker position when the next shock comes.”
Exhausted ‘shock absorbers’
Already, oil traders are bracing for another potential supply shock as the three-month ceasefire with Iran has virtually collapsed in the past week. On Monday, President Donald Trump reimposed a blockade on Iran for the first time since April, and the conflict threatens to restart all over again.
The crawling pace of negotiations to end the war have largely stalled out, and the U.S. and Iran have traded military strikes in recent days over control of the Strait of Hormuz, a critical waterway for oil and natural gas shipment. The tit-for-tat attacks triggered a spike in crude prices following a months-long slide that neared pre-war trading levels.
One of the notable “shock absorbers” that the IMF identified was existing inventories. From March through May, the IMF estimated there was an average deficit of four million barrels per day.
For its part, China had accumulated the largest strategic oil stocks in the world, according to the U.S. Energy Information Administration. It drew down those reserves and simultaneously paused most of its crude purchases, freeing up limited supplies for European and other Asian nations.
Another shock absorber was the U.S. stepping up oil production, per the IMF, along with Venezuela, Guyana and Russia. The elevated production from countries outside the Persian Gulf was a critical factor that put a lid on crude price increases, in addition to China slowing down its crude buying.
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Where oil trading goes from here
Stashed in four underground salt caverns along the Gulf coast, the U.S. has its own emergency oil stockpiles. But those supplies are rapidly dwindling, and reserves were already just over half-full at 413 million barrels at the start of the conflict.
The nation’s strategic oil reserves consists of only 319 million barrels, the lowest level since 1983, per the EIA. If all-out war resumes between the U.S. and Iran, the U.S. will continue exhausting its domestic shock absorber.
Gas prices are also climbing again. The national average for a gallon of gas reached $3.89 on Wednesday, up from $3.80 a week ago, according to AAA.
The Strait of Hormuz was once the main commercial artery that handled 20 million barrels of crude and refined products per day in shipping. That flow of energy products remains largely halted, with one million barrels on average traveling through the strait in May, per the IMF.
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Joseph Zeballos-Roig is a policy and politics journalist based in Washington D.C with a focus on economics. He is experienced in connecting the significance of events in the capital to the lives of everyday Americans whether its taxes, tariffs, interest rates or federal programs.
