This week, the IMF released its most recent forecast with the kind of weight that economic reports seldom have. Sure, it’s numbers on a page: 3.1 percent global growth, down from 3.3 and again from 3.4 last year. A war that hasn’t ended, a waterway that won’t reopen, and a tacit admission that the old map of international trade might not be returning are all hidden behind those decimal points.
It’s difficult to ignore how cautious the language is. The Fund uses terms like “policy trade-offs” and “uneven impacts,” which economists use when they don’t want to state the obvious. The obvious is that the Strait of Hormuz, which provides about 20% of the world’s oil and LNG, has essentially ceased to operate as it did six months ago. It was presented diplomatically by IMF chief economist Pierre-Olivier Gourinchas. In an interview with Al Jazeera, Boston College’s Aleksandar Tomic was more direct, describing it as confirmation of what everyone already knew.
It was first discovered by American drivers, who typically learn about foreign policy at the gas pump. The national average has increased from $2.98 on the morning of February 28, when the US and Israel started their strikes on Iran, to $4.11 per gallon, according to the AAA’s daily tracker. In less than three months, that represents a roughly 40% increase. For anyone wondering where this ends, American University’s Babak Hafezi calculated that every consistent $10 increase in crude per barrel reduces US GDP growth by roughly 0.4%. According to him, a sustained increase of $60 places the nation squarely in recessionary territory. Rumors of new negotiations caused Brent to drop to $95 on Tuesday, but no one is celebrating a price that is still significantly higher than it was in the winter.
The report becomes uncomfortable because the damage isn’t distributed equally. Iran’s own forecast for 2026 was reduced by 7.2 points to a contraction of 6.1%. On the opposite side of the Gulf, Saudi Arabia saw a decline from 4.5 to 3.1 percent. The region of the Middle East and North Africa is now projected to grow by 1.1 percent in 2026, a 2.8-point decrease. Europe is slowing as well; the eurozone’s growth rate was reduced to 1.1%. At 2.3 percent, the US fared relatively well, which says more about who really pays when energy chokepoints fail than it does about American resilience.
Reading the report alongside the news cycle gives the impression that the discussion has already shifted from whether Hormuz will reopen to what will be constructed in its place. A few weeks ago, Netanyahu proposed on Newsmax that Gulf pipelines be rerouted westward, across Saudi Arabia, and out through the Mediterranean and Red Sea, with Israel serving as the safe endpoint. It’s not really about pipes, but it’s a bold pitch. It’s about using geography as leverage. Another question is whether the Saudis would genuinely agree to a project that gives Israel a permanent place in their export economy. Investors appear to think something will be constructed, but no one is saying exactly what.
The little details, meanwhile, continue to accumulate. Since March 2, Qatar’s Ras Laffan, which produces 93% of the nation’s LNG, has been dark. The IMF projects that it will take three to five years to reach full capacity. The Houthi attacks have permanently rerouted insurance calculations throughout the shipping industry, and Bab al-Mandeb traffic is still stuck at about half of its 2023 levels. Trump’s post on Truth Social suggesting a complete blockade of Hormuz could be a bluff, maximum pressure, or both. The delegation led by JD Vance returned empty-handed.
There’s a chance that negotiations will resume and prices will drop. It’s also possible that while everyone keeps an eye on the price of barrels, the world is subtly redrawing its trade routes.
