The global economy has absorbed the energy supply shock triggered by the closure of the Strait of Hormuz better than anticipated, International Monetary Fund Managing Director Kristalina Georgieva said on Tuesday.
Speaking to reporters ahead of the Group of 20 finance leaders meeting in Asheville, North Carolina, Georgieva noted that the disruption—driven by the Iran-linked conflict—was met with resilience from a combination of policy and structural factors. Countries drew down strategic oil and gas reserves, expanded non-Gulf energy supplies, and benefited from lower energy demand alongside increased renewable capacity. In some regions, coal power generation also returned as a transitional buffer.
The shock occurred against a backdrop of persistent fiscal pressures in several economies, but Georgieva emphasized that the world economy had resisted "powerful headwinds" from high debt levels, stubborn inflation and trade tensions. "Thus far, it has weathered the energy shock caused by the closure of the Strait of Hormuz better than we feared," she said.
The IMF chief framed the episode as a "tug of war" between the negative impact of the energy supply disruption and the stimulative effects of the artificial intelligence investment boom, which is broadening beyond U.S. borders. Thailand was cited as an example of a country ramping up data-center construction and AI hardware supplies, while strong corporate earnings and consumer spending in the United States were linked to AI-related investment.
Despite the improved balance of risks compared with April, Georgieva warned that the outlook remains tilted to the downside. Central banks must remain "laser-focused" on price stability, she said, noting that a renewed rise in oil prices could reignite inflation and necessitate a prolonged restrictive policy stance. She also stressed the need for governments to present credible fiscal plans to place debt and deficits on sustainable trajectories.
Additional concerns included rising bond yields, a stalled disinflation process and the risk that low-income countries could fall further behind amid the rapid technological shift.
