WASHINGTON (AP) – The Iran war is likely to stall global economic momentum this year, resulting in lower growth than in 2025, the International Monetary Fund warned Tuesday.
The IMF has lowered its 2026 global growth forecast to 3.1% from 3.3% in January. The expected growth rate will slow from 3.4% expansion in 2025.
The US and Israeli attacks on Iran, as well as Iran’s blockade of the Strait of Hormuz and retaliatory attacks on refineries and other energy infrastructure in neighboring countries, have caused oil and gas prices to rise sharply around the world.
As a result, the IMF has raised its forecast for global inflation this year to 4.4% from 4.1% in 2025, and from the 3.8% expected this year in January.
Before the war, the global economy had shown remarkable resilience in the face of President Donald Trump’s protectionist policies, which erected a wall of import taxes around the world’s largest economy and a market that was once effectively wide open to imports. The damage was not as great as feared, partly because President Trump’s tariffs last year were lower than originally announced.
A technology boom characterized by huge investments in data centers and artificial intelligence, coupled with increased productivity, has strengthened the global economy.
“The war in the Middle East has stopped this momentum,” Pierre-Olivier Grinchat, the IMF’s chief economist, said in a blog post accompanying the fund’s latest World Economic Outlook.
“The IMF’s forecast assumes that the conflict in the Persian Gulf will be short-lived and that energy prices will rise “modestly by 19%” this year. Things could get even worse. In a “severe scenario” in which energy shocks spill over into next year and central banks are forced to raise interest rates to fight inflation, global growth could fall to 2% in 2026 and 2027. Downside risks remain high,” Grinchas wrote.
The fund slightly revised down its U.S. growth forecast for this year to 2.3%. The IMF expects the 21 European countries that share the euro currency, which have been hit hard by soaring natural gas prices, to grow by 1.1% this year, down from 1.4% in 2025.
The hardest hit will likely be highly indebted, poor countries that import energy and cannot afford to cushion their economies with increased government spending or tax cuts. The IMF, for example, has sharply cut its growth forecast for sub-Saharan Africa this year to 4.3% from 4.6% expected in January.
Emerging as one of the winners from the conflict is Russia, an energy exporter that stands to benefit from soaring prices. The IMF has revised upward its outlook for Russia’s economy, which has been hit hard by sanctions following the 2022 invasion of Ukraine, to a still modest 1.1%.
Meanwhile, the head of the National Bank of Ukraine is trying to keep Russia’s war in his country at the center of talks among world economic leaders. But in an interview with reporters on Monday, Andriy Pishny pointed out how the soaring oil prices caused by the Iran war are hurting his country.
Through an interpreter, he said Ukraine’s annual inflation rate reached 7.9% in March, well above expectations of 7%, mainly due to rising fuel costs. He estimated that fuel prices could push up annual inflation by 1.5 to 2.8 percentage points.
Pyshny said the ongoing war with Russia, which bombs Ukraine every three to four minutes on average, could also increase fertilizer and production costs in an economy seeking stable prices.
“We’re walking on a razor’s edge,” he said of a mission complicated by external factors.
The IMF is the lending institution of 191 countries and works to promote economic growth and financial stability and reduce global poverty.
