IMF cuts 2026 world growth forecast, citing Iran war fallout
The IMF lowered its 2026 global growth forecast to 3%, blaming the energy shock from the US-Israel war on Iran, partly offset by AI demand.
The International Monetary Fund (IMF) on Wednesday released its latest World Economic Outlook, cutting the 2026 global growth forecast to 3% from April's projection of 3.1%. The fund cited the "lingering effects" of the energy shock resulting from the US-Israel war on Iran. The slowdown is described as "modest" and is partly offset by AI-driven demand.
Growth is expected to rebound to 3.4% in 2027, slightly below the 2024-2025 average of 3.5%, according to the IMF.
Inflation and Oil Markets
Global inflation is forecast to reach 4.7% this year, up from 4.1% in 2025, before easing to 3.9% in 2027.
Oil prices surged after the US resumed strikes on Iran. Brent crude rose as much as 7% on Wednesday, topping $79 a barrel at one point, following US President Donald Trump's statement that the ceasefire was "over."
Shipping through the Strait of Hormuz, which before the war handled about one-fifth of global oil and LNG trade, remains heavily restricted. The IMF assumes the strait will begin reopening in mid-July and return to "pre-war state" by March.
Country Forecasts
The IMF projects the US to be the fastest-growing major advanced economy in 2026, with GDP growth of 2.3%. In comparison, the Eurozone is expected to grow 0.9%, the UK 1%, Canada 1.1%, and Japan 0.6%. China, classified as an emerging economy, is forecast to grow 4.6%.
