The International Monetary Fund (IMF) has warned that depleted global oil reserves have increased vulnerability to soaring fuel prices amid the resumption of conflict between the US and Iran.

Before the conflict began in late February 2026, global oil supplies exceeded demand by about 2 million barrels per day, a buffer that helped prevent a more severe price shock during the largest oil supply disruption in over five decades. However, the IMF noted that by the end of May, oil reserves had fallen to approximately 1.2 billion barrels—half the level prior to the conflict—because these reserves absorbed supply deficits the market could not.

The IMF stated, "With buffers now depleted, the system is more exposed if disruptions persist or escalate anew, and rebuilding stocks will keep the market tight even as supply recovers."

Approximately 20 percent of the world's oil supply transited through the Strait of Hormuz before the war, a critical chokepoint recently closed, causing oil prices to rise by more than 10 percent. Some experts estimate it could take about two months for the full impact of the Strait of Hormuz closure to be reflected in oil markets.

Oil production outside the Gulf region has increased by nearly 2 million barrels per day above 2025 levels, mainly from the US, Venezuela, Guyana, and Russia, partially offsetting Gulf supply losses.

Analysts, including Commonwealth Bank's Vivek Dhar, suggest it will take about 10 weeks for reduced Gulf oil output to affect markets. Dhar added, "Markets now have more of a reason to price in this scenario and suggests that, if the status quo persists, we could see Brent oil futures lift towards $US100/bbl in the next 10 days."

The IMF also warned that if current disruptions continue, the lower bound of oil reserves could be reached by early 2027, further tightening the market.

Sources