Diesel and jet fuel shortages for some time, IMF warns

The world will experience diesel and jet fuel shortages "for some time" because of the war in Iran, according to the International Monetary Fund (IMF).

The halting of normal flows through the Iran-controlled Strait of Hormuz - the vital oil and gas shipping route - "will for some time continue to have ripple effects", said the organisation's managing director Kristalina Georgieva.

She specifically mentioned shortages in refined oil products, diesel and jet fuel.

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Ms Georgieva said the conflict was testing ‌the global economy, with a 13% reduction in the daily flow of the world's oil and a 20% cut in liquefied natural gas which have sent energy prices soaring, while disrupting supply chains.

On Thursday, ship traffic through the strait was below 10% of normal volumes despite a US-Iran ceasefire agreed this week, as Tehran asserted its control. Hundreds of tankers have been unable to get through since the war began on 28 February.

Meanwhile, Iranian officials ‌have raised the idea of charging a ​toll for using the key waterway.

Echoing warnings from the UN's World Food Programme, Ms Georgieva said high fertiliser prices will contribute to food insecurity for another 45 million people globally, taking the total number of people in hunger to more than 360 million.

Natural gas is a key input in fertiliser production, so supply chain disruption and more expensive gas can limit availability.

There is no quick fix to supply disruption and elevated fossil fuel costs, the world's lender of last resort said in a speech ahead of the publication of its World Economic Outlook report.

"Even in a best case, there will be no neat and clean return to the status quo ante," said Ms Georgieva.

"The fact is, we don't truly know what the future holds for transits through the Strait of Hormuz."

A downgrade

All of this has led the IMF to downgrade its forecast for global economic growth, even in its "most hopeful scenario", she added.

"Scarring effects" such as infrastructure damage and supply disruption are behind the IMF's downgrade, the details of which will be published next week.

Growth will slow even if the current two-week ceasefire between the US, Israel and Iran holds, the IMF's head added.

Had the war not started, it would have upgraded its economic outlook as part of its six-monthly analysis of global economic trends.

Partial good news?

But the effects will not be long-lasting, Ms Georgieva said.

The impact on price rises and effect on the rate of inflation will only be in the short term.

"Longer-run expectations have not budged," she concluded.

This is in contrast to the energy price shocks after Russia's 2022 full-scale invasion of Ukraine, which caused a cost of living crisis that is still being felt.

State support

Governments should provide "targeted and temporary" support to vulnerable people, the IMF said.

The UK government has a scheme that home heating oil users can apply to and said it is considering broader energy supports for some households.

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