The global economy has proved more resilient than expected against the energy shock triggered by conflict in the Gulf, according to International Monetary Fund (IMF) Managing Director Kristalina Georgieva. Speaking ahead of the Group of 20 finance ministers meeting in Asheville, North Carolina, Georgieva noted that downside risks have softened since spring. A major driver of this resilience is a “tug-of-war” between negative energy supply disruptions and significant economic tailwinds generated by the global artificial intelligence boom.

Countries managed the severe supply shock caused by the closure of the Strait of Hormuz through emergency oil reserves, increased non-Gulf production, reduced demand, expanded renewable capacity, and temporary returns to coal power. Additionally, massive AI infrastructure spending originating in the U.S. is now spreading internationally, propping up corporate earnings and private consumption. Despite Brent crude prices stabilizing in the $80–$90 range after spiking above $118 earlier in the year, Georgieva cautioned that the energy crisis is far from over and renewed price spikes could quickly reactivate inflationary pressures.

Beyond energy, the IMF chief raised alarm over deteriorating fiscal health and stalled disinflation globally, pointing to surging bond yields as evidence of rising sovereign borrowing costs. Higher interest rates required to contain sticky inflation continue to compound debt-servicing burdens. Georgieva urged governments to enact credible, long-term deficit reduction plans—a warning that aligns with recent spikes in U.S. Treasury yields—while pressing central banks to maintain their focus on price stability. Furthermore, she called for addressing structural trade imbalances, indirectly echoing long-standing concerns regarding export-led growth models like China’s, to prevent further economic fragmentation.

Click here for more on Finance and Investing