""War in the Middle East has halted this momentum," IMF chief economist Pierre-Olivier Gourinchas wrote in a blog post accompanying the fund's latest World Economic Outlook."
"The IMF's forecast assumes that conflict in the Persian Gulf is short-lived and that energy prices rise 'a moderate 19%' this year."
"In a 'severe scenario' in which the energy shocks spill into next year and central banks are forced to raise interest rates to combat inflation, global growth could drop to 2% in 2026 and 2027."
"Despite the recent news of a temporary ceasefire, some damage is already done, and the downside risks remain elevated."
The International Monetary Fund downgraded its global growth forecast for 2026 to 3.1%, down from 3.3%. The Iran war has disrupted economic momentum, leading to higher oil and gas prices. Global inflation expectations have risen to 4.4% for this year. Prior to the conflict, the world economy showed resilience against protectionist policies and benefited from a tech boom. The IMF's forecast assumes a short-lived conflict, but warns of severe scenarios that could drop growth to 2% if energy shocks persist.
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