IMF: Buffers against the Iran war price shock are running out, while the IEA warns of a diesel shortage into 2027

The safety buffers that limited the economic fallout of the war with Iran are running out. The warning came on Thursday, October 15, from Jihad Azour, director of the International Monetary Fund’s Middle East and Central Asia department, at a briefing on the sidelines of the IMF and World Bank Annual Meetings in Bangkok.

“The impact was more limited than the scale initially implied,” Azour said. “These buffers bought time, but they are finite. Inventories are lower, spare capacity is more limited and a new disruption could trigger much larger price adjustments.”

What the buffers were

The cushions included the release of emergency stocks by members of the International Energy Agency in March, alternative export routes for Saudi Arabia and the United Arab Emirates, higher production outside the Gulf and falling demand.

Azour called the region’s outlook “extremely uncertain”, with the biggest risk being a prolonged conflict. The IMF’s forecasts for 2026 show recessions across the Gulf:

• Bahrain: -11.3%
• Iraq: -16%
• Kuwait: -16.7%
• Qatar: -15.6%
• Saudi Arabia: -3.3%
• United Arab Emirates: -3.9%

Growth is expected to recover in 2027, “but output will remain below the medium-term path projected before the conflict”. Brent was trading at $106.1 on October 14, 47% above pre-war levels.

IEA: diesel shortage into 2027

A day earlier, the IEA’s monthly oil market report warned that the global diesel shortage will last well into 2027. Net diesel exports from the Middle East and Russia fell by more than 60% year on year in September, to 820,000 barrels per day.

• Wholesale diesel prices reached a record of about $220 a barrel in Europe and the United States.
• US retail diesel passed $6 a gallon for the first time.
• US diesel inventories at the end of September were at their lowest seasonal level in 14 years.
• Gulf crude exports rose in September to 13.9 million barrels per day, above 75% of pre-war levels, while global inventories were 509 million barrels below pre-war levels.

Without a recovery in Middle East product exports, new cuts in consumption may be needed, with a “heavy economic cost”, according to the report.

The diesel squeeze had prompted Donald Trump to announce a deal with Vladimir Putin on Russian diesel, which we covered in our report on the Putin–Mohamed bin Zayed call. Attacks on ships also continue, such as the one on the LPG tanker NV Sunshine south of the Strait of Hormuz.