IMF chief economist warns of global economic blow if US-Iran truce collapses

Pierre-Olivier Gourinchas, the IMF's chief economist, warned Friday that the global economy could face greater risks if the US-Iran truce breaks down, citing the significant depletion of strategic petroleum reserves during the Middle East conflict.

Speaking to Reuters on Friday, Gourinchas said reserve stockpiles are "quite depleted at this point," adding that if hostilities resume, countries would have "much less room to maneuver than before."

He credited the rapid release of strategic reserves and output adjustments by refiners during the Iran conflict with helping contain a sharp spike in global oil prices.

Markets had initially feared that 10 to 15 percent of global oil supply could be disrupted. In the end, the actual supply shortfall was limited to around 3 percent, keeping price increases more modest than expected.

However, with strategic reserves now substantially drawn down, Gourinchas warned that a collapse of the truce and renewed supply disruptions would put significant downward pressure on the global economy.

The truce has recently come under fresh strain. Donald Trump criticized Iran for attacking a merchant vessel near the Strait of Hormuz, calling it a violation of the truce. US forces retaliated that day, striking Iranian missile and drone storage facilities and coastal radar stations.

Gourinchas also said the global trade order is rapidly reshaping in the wake of the Trump administration's tariff policy.

Pointing to the EU's recent conclusion of long-stalled trade deals with Latin American countries and India — agreements that had dragged on for decades — he said the moves were "no coincidence," explaining that trading partners "had no choice but to strengthen trade ties with other countries."

He also noted that many of the newly concluded trade agreements do not include the United States.

Gourinchas went on to say that while tariffs and economic sanctions can be effective in the short term, they have clear limits over the long run.

"The other side is never passive," he said. "They find ways around it, they accelerate their own innovation, they build new trade relationships with other countries — so basically those policy tools become ineffective."