The global economy is showing surprising resilience, with major economies absorbing a 50% oil price shock following the closure of the Strait of Hormuz.
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Global economy weathers 50% oil shock from Hormuz closure
The gravest energy shock since the 1970s is testing the world’s economic durability after Iran’s closure of the Strait of Hormuz two months ago yanked 13 million barrels of oil a day from global supplies, yet major economies are proving unexpectedly resilient. The price of Brent crude, the global oil benchmark, has risen more than 50 percent since the strait was closed in response to U.S. and Israeli attacks.
Better energy efficiency “cushions the shock” from supply disruptions, International Monetary Fund Managing Director Kristalina Georgieva said in April. Underlining the global economy’s resilience, the IMF said that assuming energy flows through the strait resume by midyear, it expects only modestly slower growth this year than in 2025, at around 3.1 percent versus 3.4 percent last year.
Despite the supply shock, which has caused diesel prices to soar to R31.54 in some regions, many of the world’s major economies have avoided the swift downturns that accompanied similar crises in the 1970s and 1990s. Stock markets are touching record highs, blackouts have hit Pakistan, and the Philippines has imposed a four-day workweek.
A more severe test will come if the conflict persists. If the strait remains closed into next year, the IMF warned global growth in 2026 could sink to around 2 percent, bringing the world economy close to recession. Poor countries without deep energy reserves are already struggling with shortages and high import prices.
Resilience Factors Cushion Blow
This resilience stems from a combination of ample energy reserves, government policies to aid consumers, and the offsetting effects of the artificial-intelligence boom. Japan and Korea had around 200 days’ worth of reserves on hand in January, according to the International Energy Agency, while Europe had 130 days’ supply. China’s stockpile is estimated to be enough for about 100 days.
For Asia especially, another counterweight has been buoyant exports. The AI boom has created ravenous demand for Asia-made chips and machinery. Exports from Japan were 12 percent higher in March than a year earlier, while in South Korea they rose almost 50 percent and in Taiwan, they rocketed 68 percent. “AI is papering over the cracks,” said Stefan Angrick, head of Japan and frontier markets economics at Moody’s Analytics in Tokyo.
Energy Efficiency Gains Pay Off
A deeper reason for the global economy’s resilience is a structural improvement in energy efficiency. The energy needed to generate a dollar of gross domestic product has fallen by about a third in the U.S. and Europe and by about 40 percent in China since 2000, according to World Bank data. Advanced economies have shifted to less energy-intensive services, and the rise of renewables has also played a role.
Companies have also actively squeezed out improvements. German engineering giant Thyssenkrupp has improved its use of energy by capturing waste heat, while France’s Saint-Gobain has started using AI to monitor and adjust energy use in its fiberglass furnaces to boost efficiency.
This article is for informational purposes only and does not constitute investment advice.
[1] Here’s What’s Shoring Up the Global Economy During the Energy Shock - WSJ[2] Diesel prices will hit your wallet hard – Here’s what you will pay[3] Gasoline prices surge 50% in the US amid Iran conflict[4] Shock at the pumps as diesel prices soar to R31.54[5] ‘M’East crisis impacting real estate sector’
