The promised reopening of the Strait of Hormuz has come too late to spare some of the world’s poorest countries from economic and fiscal distress, officials have warned, even as it removes some of the shackles on more prosperous countries’ prospects.
Speaking at the end of the IMF’s spring meetings in Washington on Friday, Kristalina Georgieva, the fund’s managing director, warned the crisis in the Middle East would still present a “serious threat” to the global economy even if the conflict ends tomorrow.
There were about a dozen countries that might need additional support from official lenders should conditions worsen, said Georgieva. Most were in Africa, she added, and between five and eight of those were in IMF programmes that might require “augmentation”.
Adam Posen, president of the Peterson Institute think-tank, warned of a “triple whammy” for lower and middle-income energy importers of higher energy, food and fertiliser prices — combined with a stronger dollar.
“This is a world in which the pain is really going to be much more on the developing world than on the high-income world,” Posen added.
The warnings underscored the asymmetric nature of the energy crunch and the long-lasting effects of a crisis that analysts warn will leave scars on production and keep oil and gas prices high.
Participants in the IMF/World Bank spring meetings were privately seething over the damage the US action will do to the global economy.
“The war is global economic vandalism,” said one European central bank governor.
Financial markets rallied during the week and oil prices fell given the signs of progress between the US and Iran, with Tehran agreeing to reopen the Strait of Hormuz. US President Donald Trump signalled Washington and Tehran were nearing a deal to end the war, declaring that the strait was “ready for business and full passage”.
“It wasn’t as hair-on-fire as it was last year, when people were grappling with the tariffs,” said Nathan Sheets, global chief economist at Citigroup. “There’s still anxiety, but more awareness of the global economy’s underlying resilience.”
Andrzej Domański, the Polish finance minister, agreed the crisis could end up having “a quite limited impact on the global economy” as a whole, if it ends quickly.
But he was far less sanguine about the implications for lower-income and developing countries that are heavily reliant on imported energy.
“When I see yields rising for emerging markets, or sub-Saharan countries, then one can understand that the pain is not evenly shared,” he said.
Georgieva highlighted the pressures on poorer, import-reliant countries with limited fiscal space which are more exposed to the inflationary shock. “It pains me that the majority of sub-Saharan Africa countries are in this quadrant of vulnerability.”
In its World Economic Outlook the IMF cut growth forecasts for emerging and developing economies by 0.3 percentage points, while the outlook for advanced economies as a whole was left unchanged — although some countries, including the UK, suffered notable downgrades.
Fuel shortages have already spread across Africa, with countries from Ethiopia to Sierra Leone feeling the effects. For some countries, disruptions to fuel supply have already hit electricity generation and transportation, while surging fertiliser prices have pushed up food prices.
More than a third of sub-Saharan countries are at high risk of, or already in, debt distress, according to an IMF report, while in 21 countries, fiscal deficits are at levels above what is needed to stabilise debt.
The Democratic Republic of Congo’s finance minister said that the ability of countries in the region to cope with the inflationary shock would depend on the state of their economies and their efforts to tackle debt in recent years.
“A country with strong fundamentals can weather the storm,” Doudou Roussel Fwamba Likunde told the FT. “Yes indeed we are going to be affected globally. But as we’ve been doing huge reforms, we do believe that the fundamentals are going to help us weather it.”
The IMF and the World Bank are due to sit down to assess which countries are most vulnerable and how much support will be needed as they weigh up a range of potential funding options.
Reza Baqir, the former governor of Pakistan’s central bank, said the Middle East conflict had unleashed “a massive transfer of wealth from energy importers to exporters”.
“Those countries that were already wobbling may find themselves being tipped into a financial distress situation,” said Baqir, a longtime IMF official who now leads the sovereign advisory services team at consultants Alvarez & Marsal.
Governments seeking help from the IMF and World Bank would find it hard to end subsidies on energy and food prices, he said. “Forcing them to pass on the higher cost of food and fuel prices will mean these governments become unpopular.”
The messaging from US officials was, by contrast, far more upbeat.
Kevin Hassett, director of the National Economic Council, insisted that the “whole world” was more resilient than it used to be in the face of higher oil prices. “The impact of an oil shock has gone down because we have got a lot more energy efficient.”
US officials talked up the US economy’s prospects thanks to the ongoing AI boom and its status as a net energy exporter. The IMF only modestly trimmed its 2026 growth forecast for the US to 2.3 per cent, which would still represent an acceleration from last year’s 2.1 per cent expansion.
Nevertheless, Isabelle Mateos y Lago, BNP Paribas chief economist, said she expected the energy shock to exacerbate the gap not only between the rich and the poorest countries, but within the US itself — a trend often referred to as the K-shaped economy.
Much of the pain for the rise in costs at the pump is being heaped on the poorest Americans, who tend to spend much more of their income on fuel than their wealthier counterparts.
Richer Americans, meanwhile, have recently benefited from big tax refunds and the wealth effect from higher stock prices — with the S&P 500 this week hitting a fresh high.
“What it does in an election year is going to be interesting,” Mateos y Lago added. “You don’t have K-shaped voting — everybody has a vote.”
On Friday, Brent crude oil prices fell 11 per cent to $88 a barrel — the lowest in five weeks. But Saudi Arabia’s finance minister Mohammed Al-Jadaan warned the situation remained “very fragile” and would remain so until there was a “serious, credible de-escalation” in hostilities.
“This is the second major supply shock in a few years and I’m convinced it won’t be the last,” added Eelco Heinen, finance minister of the Netherlands, in an interview. Uncertainty, he said, was the new constant.
“The world seems to change by tweet, and there will always be another tweet.”