IMF cuts 2026 global growth forecast on Mideast war

The IMF cut its 2026 global growth projection Tuesday, warning that the world economy could be “thrown off course” by war in the Middle East — as the conflict roils commodity markets and sparks higher prices. The global economy is set to grow by 3.1 percent this year, said the International Monetary Fund in itsWorld Economic Outlook report, released during its spring meetings in Washington. This is down from 3.3 percent forecast in January before hostilities erupted February 28 with US-Israeli strikes against Iran that prompted Tehran’s retaliation and sparked a broader conflict in the region.

“We were planning to upgrade growth for 2026 to 3.4 percent” if not for the war, IMF chief economist Pierre-Olivier Gourinchas told AFP. Prices of oil, gas and fertilizers have surged, as Iran virtually blocked traffic through the Strait of Hormuz, a key shipping waterway. US President Donald Trump has also ordered a naval blockade around Iran’s ports.

The IMF expects higher inflation this year at 4.4 percent, 0.6 percentage points above its January forecast. Compared to the oil shocks of the 1970s, “the global economy is much less oil dependent now than it was back then,” Gourinchas said at a Tuesday press conference. “There are many other sources of energy, renewables, nuclear and other things, and also the global economy has become much more efficient in terms of how much it needs oil to produce GDP,” he said.

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“That’s a source of resilience.” After this the “disinflation path” of recent years should reassert itself, Gourinchas said. But these projections assume a relatively short-lived conflict with temporary energy market disruptions. In more adverse scenarios where energy prices remain steep, global growth could slow to 2.5 percent or even around 2.0 percent.

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