The International Monetary Fund (IMF) has cut its global economic growth forecast as tensions between the United States and Iran raise the cost of energy and food globally.
The IMF said on Tuesday that it expects global economic growth to reach 3.1% this year, slowing from an earlier forecast of 3.3% released before the United States and Israel launched their war against Iran on February 28.
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Since then, Iran has retaliated by closing the Strait of Hormuz, a key chokepoint for oil and gas supplies, and has attacked energy infrastructure in the region, driving up oil prices and straining oil and gas supplies, a development that has hit the countries most dependent on these imports particularly hard.
The new report also shows a slowdown from last year, when the economy expanded by 3.4%. The IMF said some regions and countries will be hit harder than others.
For example, the outlook for Iran has undergone one of the largest revisions at the country level, with its initial modest growth forecast for 2026 reduced by 7.2 percentage points, resulting in a projected contraction of 6.1%.
The IMF also lowered Saudi Arabia’s GDP growth forecast from 4.5% to 3.1%.
“Current hostilities in the Middle East pose immediate policy trade-offs between combating inflation and sustaining growth, and between supporting those affected by rising costs of living and rebuilding fiscal buffers,” the IMF said in its World Economic Outlook report.
“The economic situation is highly uneven across countries, with countries in conflict zones, low-income importing countries and emerging market countries likely to be hit hardest,” Chief Economist Pierre-Olivier Grinchat said in a release.
The growth forecast for the Middle East and North Africa in 2026 has been lowered by 2.8 percentage points to 1.1%. The IMF has lowered its 2026 forecast for the Middle East and Central Asia by 2 percentage points to 1.9%.
Meanwhile, growth in the euro zone is expected to slow to 1.1% this year from 1.4% in 2025, lower than the 1.3% forecast in January.
The downward forecast comes as oil, gas and fertilizer prices have soared as traffic in the Strait of Hormuz, through which about 20% of the world’s oil and liquefied natural gas supplies pass, has slowed.
“This is just another confirmation of what we knew that the wars in the Middle East were changing the trajectory of growth in the immediate term and, by extension, probably in the long term as well,” Alexander Tomic, associate dean for strategy, innovation and technology at Boston University, told Al Jazeera.
inflation pressure
The IMF said it expects global inflation to be 4.4%, up 0.6 percentage points from its January forecast.
Grinchas said the fund is monitoring the impact of a strong dollar on inflation in developing countries, as it is a typical transmission channel for tightening financial conditions in emerging markets.
The IMF has cut its forecast for U.S. growth this year to 2.3%, down just one-tenth of a percentage point from January.
Experts argued that continued tensions in the Strait of Hormuz could worsen inflationary pressures in the coming months.
“For every $10 sustained increase in gasoline prices (per barrel), we should expect GDP growth to decline by about 0.4%. So a sustained increase of $60 above the average price would put the United States firmly in recessionary territory,” Babak Hafezi, an international business professor at American University, told Al Jazeera.
U.S. gasoline prices continue to rise, with the average price per gallon (3.78 liters) at $4.11, up from $2.98 on Feb. 28, when the U.S. and Israel attacked Iran, according to the American Automobile Association, which tracks daily gasoline prices.
However, pressure on oil prices may ease. Oil prices fell on Tuesday on hopes that Iran would resume talks with the United States to end the war.
Brent crude oil futures fell 4.37% on the day to $95.02 per barrel. West Texas Intermediate crude fell $7.27, or 7.32%, to $91.84. But they are still at a much higher level than before the Iran war.
