International Monetary Fund (IMF) Managing Director Kristalina Georgieva has warned that the global energy shock remains a significant risk to the world economy, with high fuel prices, supply disruptions and geopolitical tensions potentially prolonging inflation and economic uncertainty into 2027.
Speaking in Singapore on developments in global energy markets, Georgieva said the effects of the energy crisis have remained substantial but relatively contained so far. She attributed this partly to greater energy efficiency, diversified fuel supplies, releases from strategic reserves, adaptable supply chains and market adjustments in supply and demand.
However, she said oil prices remain close to US$100 a barrel despite some improvement in energy flows from the Gulf region. Continued geopolitical risks, higher transportation costs and uncertainty in global markets are contributing to the elevated prices.
Georgieva also pointed to a major shortage in global refining capacity, which has widened the gap between crude oil prices and the cost of refined petroleum products. This has pushed retail prices for diesel and other refined fuels to record levels in several countries.
She said natural gas supplies are also under pressure, with Gulf gas exports remaining constrained by limitations on liquefied natural gas transportation routes. Security concerns surrounding shipping through the Strait of Hormuz have added further uncertainty to global energy supplies.
According to the IMF chief, the impact of the disruptions varies across regions, with Asia and Europe facing some of the greatest pressures from higher energy costs and supply constraints.
Georgieva warned that energy markets could come under additional pressure in the coming months as countries replenish their reserves and demand for heating rises during winter in the Northern Hemisphere.
Referring to the popular television series Game of Thrones, she said, “winter is coming,” highlighting the possibility of further increases in energy prices before conditions eventually stabilize.
She stressed that even if tensions in the Gulf ease soon, elevated energy prices are unlikely to decline rapidly. Market projections indicate that Brent crude prices could remain relatively high through 2027, potentially continuing to burden households, businesses and governments.
Georgieva further cautioned that prolonged high energy prices could intensify inflationary pressures worldwide, forcing central banks to keep interest rates elevated for longer while increasing government borrowing costs and putting upward pressure on benchmark bond yields.
