The surging prices in Oil are putting the global economy at risk of entering a recession, according to IMF Managing Director Kristalina Georgieva. The price of crude has climbed nearly 45% in the last three months, largely due to the ongoing war between the US and Iran. The Strait of Hormuz, which accounts for roughly one-fifth of oil movement globally, has been closed on and off since the war began, with both the US and Iran trying to take control.

The International Monetary Fund director warned on Wednesday that if oil prices remain between $120 and $130 per barrel through 2027, the global economy could slip into a technical recession. At the time of writing, Oil prices sit at $106.84. However, there’s a solid chance that pil prices could rise further over the summer as rapidly depleting inventories pile more pressure on the market, the IEA said.

The oil market report for May noted that global oil supply declined by a further 1.8 million barrels per day in April, taking total losses to 12.8 mb/d since the U.S.-Israeli war with Iran began on February 28. “More than ten weeks after the war in the Middle East began, mounting supply losses from the Strait of Hormuz are depleting global oil inventories at a record pace,” the IEA wrote.

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Furthermore, Last month, the IMF warned that a prolonged war between the U.S. and Iran could also trigger a recession. In its worst-case scenario, the fund sees oil prices averaging $110 per barrel this year with global gross domestic product (GDP) growing 2%. “The global outlook has abruptly darkened following the outbreak of war in the Middle East,” said the IMF. Brent crude oil (BZ) has surged 41% to $108 since the start of the conflict on February 28 as the two sides remain locked in a stalemate.

In the United States, the rise in oil prices has been felt by several Americans. Gas prices are climbing across the country to north of $4. Hawaii remains the only state in the US where gas prices have already climbed above the $5 mark, and are priced at $5.6 per gallon. However, other US states aren’t far behind.

Source: Watcher Guru