The International Monetary Fund (IMF) has warned that the ongoing conflict in the Middle East is pushing the global economy towards higher prices and slower growth, as disruptions to energy supply, trade routes and financial markets ripple across countries.
However, the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreed yesterday to raise oil production quotas by 206,000 barrels per day (bpd) for May, a move largely symbolic amid the ongoing United States-Israeli conflict with Iran.
In a blog post, the IMF said the war had become a fresh global shock, dimming economic prospects at a time when many countries were only beginning to recover from earlier crises. It noted that the worldwide impact was uneven, with energy-importing and low-income countries facing the greatest strain.
“The shock is global, yet asymmetric. Energy importers are more exposed than exporters, poorer countries more than richer ones, and those with meagre buffers more than those with ample reserves,” the Fund stated.
It explained that beyond the humanitarian toll, the conflict has disrupted infrastructure and industries in directly affected countries, weakening their short-term growth outlook despite underlying resilience.
The IMF identified energy as the main channel through which the shock is spreading, citing major disruptions linked to the Strait of Hormuz, a key route for global oil and gas supplies.
The report added that higher fuel and power costs were raising production costs in Asia’s manufacturing economies and weakening purchasing power, while in Europe, the shock was reviving concerns similar to those of the 2021 to 2022 gas crisis.
In contrast, some oil-exporting countries may benefit from higher prices, with stronger fiscal and external positions, although gains could be limited where exports are constrained, or uncertainty dampens investment.
The IMF also warned that the war is reshaping global supply chains, as shipping routes are diverted and air traffic is disrupted, leading to higher freight and insurance costs and longer delivery times.
THE modest quota increase by OPEC+ represents less than two per cent of the supply disrupted by the blockade, underscoring the limited immediate impact on global oil flows.
Former OPEC official and now head of geopolitical analysis at Rystad Energy, Jorge Leon, said: “In reality, it adds very few barrels to the market. When the Strait of Hormuz is closed, additional barrels from OPEC+ become largely irrelevant.”
The eight OPEC+ countries – Saudi Arabia, Russia, Iraq, United Arab Emirates (UAE), Kuwait, Kazakhstan, Algeria and Oman – met virtually yesterday to review global market conditions and adjust production quotas amid unprecedented disruption in global oil flows.
The group announced a modest production increase of 206,000 barrels per day (bpd), effective May 2026, building on previous voluntary adjustments of 1.65 million bpd in April 2023 and 2.2 million bpd in November 2023.
While the adjustment signals the members’ readiness to boost output, analysts say its impact was largely symbolic, given the ongoing blockade of the Strait of Hormuz.
The U.S.-Israeli conflict with Iran has effectively closed the critical waterway since the end of February, cutting off significant exports from Gulf producers, including Saudi Arabia, the UAE, Kuwait and Iraq. Shipping data indicates that only a handful of vessels, such as a tanker carrying Iraqi crude, have risked passage, highlighting the dangers and uncertainties surrounding maritime oil transport in the region.
For Nigeria, a major OPEC+ member, the disruption underscores exposure to global oil price swings. While higher international prices may boost crude export earnings, the crisis poses challenges for strategic energy planning, underscoring the vulnerability of even large producers to geopolitical shocks.
Nigeria’s role in OPEC+ gives it influence in shaping output decisions, but the ongoing closure of Hormuz limits the practical impact of increased quotas, reflecting the broader constraints facing the group.
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