The International Monetary Fund (IMF) has lowered its global growth projections for 2026, warning that escalating conflict in the Middle East could derail the world economy by driving up commodity prices and inflation.
In its latest World Economic Outlook released during its spring meetings in Washington, the IMF said the global economy is now expected to grow by 3.1% this year, down from the 3.3% forecast in January before hostilities erupted in late February.
IMF chief economist Pierre-Olivier Gourinchas said growth for 2026 would likely have been upgraded to 3.4% if not for the ongoing conflict.
The war has significantly disrupted global markets, with prices of oil, gas and fertilisers surging after Iran effectively restricted traffic through the strategic Strait of Hormuz, a key global shipping route. Additional pressure followed moves by Donald Trump to impose a naval blockade around Iranian ports.
The IMF now expects global inflation to reach 4.4% this year, 0.6 percentage points higher than previously projected.
Despite the shock, the fund noted that the global economy is less dependent on oil than in past decades, particularly compared to the 1970s energy crises, thanks to diversification into alternative energy sources and improved efficiency.
However, the outlook remains highly uncertain. In a worst-case scenario where energy prices remain elevated, global growth could slow to between 2.0% and 2.5%.
The IMF also warned that the impact of the crisis would be uneven, with emerging markets and developing economies expected to suffer nearly twice as much as advanced economies. Higher fuel and fertiliser costs are likely to drive up food prices, particularly affecting low-income, energy-importing countries.
Growth forecasts for the Middle East and Central Asia have been sharply revised down to 1.9% for the year, while Saudi Arabia is now expected to grow by 3.1%, significantly lower than earlier estimates.
Among the world’s largest economies, the United States is projected to grow by 2.3%, albeit slightly downgraded, while China’s growth is expected to ease to 4.4%. The euro area’s 2026 growth outlook has also been trimmed to 1.1%.
The IMF cautioned that while inflation expectations remain broadly stable, there is a risk they could become less anchored if price pressures persist. In such a scenario, central banks may be forced to raise interest rates to contain inflation, even as global growth slows.