The Hormuz shock: Who bears the cost?
The piece, co-authored by eight IMF department heads, including Chief Economist Pierre-Olivier Gourinchas and the five area department directors, focuses on how the current oil shock is global but asymmetric: energy importers are more exposed than exporters, and poorer countries more than richer ones. The IMF identifies three main transmission channels:
- Energy prices: The closure of the Strait of Hormuz represents the largest disruption to the global oil market in history, according to the IEA. For importers, the effect is akin to “a large, sudden tax on income.” European countries like Italy and the UK are especially exposed due to reliance on gas-fired power, whereas France and Spain are more protected by nuclear and renewables capacity.
- Supply chains: Rerouting tankers raises freight and insurance costs and lengthens delivery times. Critically, one-third of global fertilizer shipments pass through the Strait are currently disrupted just as the Northern Hemisphere planting season begins, threatening food prices and harvest yields throughout the year. They also flag risks to helium (sourced largely from the Gulf) and nickel processing (requiring sulfur from the Gulf), both critical for high-tech manufacturing.
- Financial conditions: Global equities have fallen, bond yields have risen, and volatility has increased. For sub-Saharan Africa and low-income South Asian economies with limited reserves and market access, wider trade deficits are pressuring currencies in a particularly dangerous way.
Inflation risk and unanchoring of expectations
The authors warn that beyond the immediate price impact, the key second-round risk is that businesses and households begin to expect persistently higher inflation i.e. de-anchoring expectations, which would make the shock far harder to contain without inducing a sharp growth slowdown. In Europe, higher energy costs risk reigniting wage demands on top of already-elevated cost-of-living strains.
Winners and losers
The article is clear that oil-exporting countries able to get barrels to market such as Gulf states, parts of Africa, and Latin American commodity producers like Brazil and Ecuador, stand to gain from improved fiscal and external positions. However, even Gulf producers whose exports are constrained by the conflict itself (e.g., some GCC members) will see limited upside from the higher prices.
How the War in the Middle East Is Affecting Energy, Trade, and Finance
By: Tobias Adrian, Jihad Azour, Nigel Chalk, Pierre-Olivier Gourinchas, Alfred Kammer, Abebe Aemro Selassie, Krishna Srinivasan, Rodrigo Valdés – IMF
The green buffer: Real but insufficient
Noah Gordon argues that the 2026 shock hits a global energy system that is measurably, albeit still insufficiently, more resilient than it was in 2022. The key differentiator is the rapid build-out of renewables, EVs, and grid-scale batteries since Russia’s invasion of Ukraine.
Three concrete shifts define the new landscape :
- Fossil fuels’ share of global electricity fell from 61% in 2022 to 57% in 2025
- Electric cars on roads grew from 26 million to 75 million (5% of the global auto stock)
- Grid-scale battery capacity exploded from 28 GW to 267 GW
Country-level resilience stories
- China: Its EV fleet is now 12% of all vehicles; fossil electricity generation actually fell in 2025 even as overall demand rose 5%. Goldman Sachs highlights China as the best-positioned major economy to weather the shock — also thanks to expanded oil stockpiles
- EU: Reduced gas consumption by 18% from 2022 to 2024 via efficiency investments and renewables, especially in Spain
- Pakistan: Imported 42 GW of Chinese solar panels since 2022, nearly doubling its electricity generation capacity
- Norway: EV stock now exceeds petrol cars; EVs are 96% of new sales
- Ethiopia: Banned fossil-fuelled car imports in 2024; already has tens of thousands of EVs, reducing reliance on the ~$6 billion it annually spent on fuel imports
The emissions paradox
The shock is producing mixed signals for climate. Some countries (e.g., India) are doubling down on domestic coal; others (Taiwan) are reviving nuclear projects; and yet others (UK, Germany) are accelerating solar and EV purchases. Gordon frames this as resilience-driven rather than decarbonization-driven energy investment.
The bottom line: better, but not enough
The article closes with a stark metaphor: clean energy forerunners “may have put some family heirlooms in a fireproof safe, but the longer the Strait of Hormuz stays shut, the more of the house will burn down” . Structural exposure remains enormous as absolute consumption of oil, gas, and coal has never been higher globally and even the most advanced clean-energy countries like Ethiopia are still rationing fuel.
Some Countries Are Better Prepared for an Energy Crisis This Time
By: Noah Gordon – Carnegie Endowment for International Peace
