IMF says oil markets have depleted all 3 'shock absorbers' as U.S.-Iran conflict threatens to restart

IMF says oil markets have depleted all 3 'shock absorbers' as U. S. -Iran conflict threatens to restart Aditi Ganguly Mon, July 27, 2026 at 6:15 PM GMT+2 10 min read Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below.

Oil markets won't be able to absorb another blow to supplies if conflict with Iran resumes in the near future, according to the International Monetary Fund (IMF). In a recent blog post, the IMF said markets had depleted a trio of "shock absorbers" that kept crude prices from skyrocketing to record-setting levels (1). Must Read Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 — 6 ways to build wealth like a landlord without actually being one JPMorgan still sees gold hitting $5,000/oz by Q4 — and savvy investors are protecting their wealth with a tax-advantaged Gold IRA.

Learn more with a free guide from Priority Gold The tax breaks in Trump's 'big beautiful bill' expire after 2028 — and experts say most people won't act in time. What to do before the window closes And the cracks are starting to show: Brent crude, a global benchmark, topped $100 per barrel in mid-July (2). Then, at the end of the month, prices stabilized again following the U.

S. announcing a pause in hostilities (3). This underscores the uncertainty surrounding the price of crude, and the fragility of peace in the region.

"As tensions flare again in the Strait of Hormuz, that room is now smaller and shrinking further as spare capacity has been deployed, demand has compressed, and inventories have been drawn down," the IMF said in the blog post. "Unless inventories are replenished, the world will start from a weaker position when the next shock comes. " Exhausted 'shock absorbers' Already, oil traders are bracing for another potential supply shock as the three-month ceasefire with Iran has virtually collapsed in the past week.

President Donald Trump reimposed a blockade on Iran for the first time in mid-July, and the conflict threatens to restart all over again. On July 22, President Donald Trump said the US will "destroy one bridge or power plant" every time Iran targets a ship transiting the Strait of Hormuz (4) — a sign that tensions could boil over again. And the signs are looking bleak: The crawling pace of negotiations to end the war have largely stalled out, and the U.

S. and Iran have traded military strikes in recent days over control of the Strait of Hormuz, a critical waterway for oil and natural gas shipments. The tit-for-tat attacks also triggered a spike in crude prices, following a months-long slide that brought prices near to pre-war trading levels.

And without those "shock absorbers" in place, the world's markets are exposed to future shocks, according to the IMF (1). Story Continues One of the notable shock absorbers identified by the IMF was existing inventories (1). From March through May, however, the IMF estimates there was an average deficit of 4 million barrels per day, leading nations like the U.

S. to dip into their reserves. For its part, China has accumulated the largest strategic oil stocks in the world, according to the U.

S. Energy Information Administration (EIA) (5). It drew down those reserves and simultaneously paused most of its crude purchases (6), freeing up limited supplies for European and Asian nations.

Another shock absorber was the U. S. stepping up oil production, along with Venezuela, Guyana and Russia.

The elevated production from countries outside the Persian Gulf was meant to be a critical factor that put a lid on crude price increases, in addition to China slowing down its crude buying. However, U. S.

reserves don't seem to be bouncing back (7). Where oil trading goes from here Stashed in four underground salt domes along the Gulf Coast (4), the U. S.

has its own emergency oil stockpiles. But those supplies are rapidly dwindling — and they were already just over half-full at 415 million barrels on February 27, a day before the start of the conflict, per the EIA (8). As of July 17, the nation's strategic oil reserves consisted of only 311 million barrels, the lowest level since 1983.

If all-out war resumes between the U. S. and Iran, the U.

S. will continue exhausting its domestic shock absorber. Gas prices are also climbing again.

The national average for a gallon of gas reached $4. 11 on July 25, up from $3. 99 a week ago, according to AAA Fuel Prices (9).

The Strait of Hormuz was once the main commercial artery that handled 20 million barrels of crude and refined products per day in shipping. That flow of energy products remains largely halted, with one million barrels on average traveling through the strait in May, per the IMF (1). Protect your finances against inflation When inflation heats up, nearly every dollar stretches a little less.

And prices at the gas pump eventually ripple through the broader economy, pushing up the cost of groceries, shipping, travel and countless everyday essentials. As geopolitical tensions between the U. S.

and Iran escalate, oil has climbed more than 20% so far in July (10), raising concerns that households could soon feel another wave of price increases. For example, BlackRock expects the conflict to lift global inflation by roughly 0. 8 percentage points (11).

Additionally, traders are placing 68% odds that the Federal Reserve could respond with another rate hike as soon as September (12) — a sign that inflation might remain elevated in the near future. However, your own financial outlook doesn't have to look so bleak. While you can't control inflation, you can take steps to make your finances more resilient, even as higher prices spread through the economy.

Audit your recurring bills As inflation chips away at your purchasing power, one of the smartest ways to fight back might not be earning more — it might be finding ways to spend less. While skipping your morning latte may save a few dollars, the biggest opportunities are often hiding in your recurring monthly expenses. Insurance, for example, is one of the easiest places to look.

The average U. S. driver now pays $1,163 for six months of auto insurance coverage as of July 2026 (13).

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Invest in an inflation-proof asset As inflation eats away at the purchasing power of cash, many investors look for assets that have historically held their value during periods of rising prices. Gold has long been viewed as one of those safe haven investments. The precious yellow metal has historically served as a store of value during periods of inflation, economic uncertainty and market volatility.

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To learn more, you can get a free information guide that includes details on how to get up to $10,000 in free silver on qualifying purchases. Just keep in mind that gold is usually used best when it's one part of a well-diversified portfolio. Set up a source of passive income One of the most effective ways to stay ahead of inflation is to create income that grows alongside rising prices.

Real estate has traditionally been one of the most reliable ways to generate passive income because rents often rise alongside inflation. That means your investment income has the potential to keep pace with rises in everyday expenses. Still, becoming a landlord isn't for everyone.

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For a limited time, when you open an account and add $1,000 or more, Arrived will credit your account with a 1% match . Talk to an expert Finally, it's worth remembering that inflation doesn't just strain your budget — it can also make long-term financial decisions much more complicated. Even financially disciplined households can be left wondering whether they're making the right moves.

According to PNC Bank, 67% of Americans say they live paycheck to paycheck, highlighting how challenging today's economic environment has become (15). If higher prices are making it harder to save, invest or prepare for retirement, it may be worth getting a second opinion. A financial advisor can help you prioritize your goals, identify unnecessary risks and develop a plan.

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Article sources We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines . International Monetary Fund ( 1 ); CNBC ( 2 ), ( 3 ), ( 10 ), ( 12 ); CNN ( 4 ); U.

S. Energy Information Administration ( 5 ), ( 8 ); The Wall Street Journal ( 6 ); U. S.

Department of Energy ( 7 ); AAA Fuel Prices ( 9 ); BlackRock ( 11 ); The Zebra ( 13 ); GoldPrice. Org ( 14 ); PNC Bank ( 15 ) This article provides information only and should not be construed as advice. It is provided without warranty of any kind.