WASHINGTON—The global economy is expected to slow in 2026 as the conflict involving Iran continues to disrupt energy markets, fuel inflation and weigh on economic activity, according to an updated outlook from the International Monetary Fund.
The IMF said global economic growth is projected to slow to 3% in 2026, down from 3.5% in 2025 and below its April forecast of 3.1%, reflecting the prolonged economic effects of the conflict following military strikes by the United States and Israel against Iran earlier this year.
The IMF said Iranian retaliation targeting regional energy infrastructure and months of disruptions to shipping through the Strait of Hormuz have driven higher energy prices and renewed inflationary pressures worldwide.
The IMF now expects global inflation to rise to 4.7% in 2026, up from 4.1% in 2025, citing elevated commodity prices.
‘Significant Uncertainty’
The New York Times reported the IMF cautioned that its forecasts remain subject to significant uncertainty, with the analysis noting that attacks this week on commercial tankers attempting to transit the Strait of Hormuz have raised questions about the durability of a recent cease-fire between the United States and Iran. The publication also reported that the Trump administration on Tuesday revoked a sanctions waiver that had temporarily allowed additional Iranian oil exports to reach global markets.
Speaking Wednesday at a North Atlantic Treaty Organization meeting in Turkey, President Trump expressed confidence that the cease-fire would hold, saying, “I think it’s over,” according to the New York Times.
More Resilient Than Expected
Despite lowering its forecast, the IMF said the global economy has remained more resilient than initially expected. Stronger-than-anticipated first-quarter growth expanded renewable energy production and continued investment in artificial intelligence helped offset some of the impact from higher oil prices.
“The global economy as a whole has, so far, weathered the shock from the war better than feared,” IMF economists wrote in the report, according to the New York Times.
The IMF said oil-producing countries in the Middle East are expected to experience the sharpest economic contractions this year.
Iran’s outlook, however, was modestly improved from the IMF’s April forecast because U.S. sanctions on its oil exports had been temporarily eased before this week’s policy reversal, according to the report.
Projections for Major Countries
Among major energy-consuming economies, the IMF projects India’s growth will slow to 6.4% this year from 7.7% in 2025, while China’s economy is expected to expand 4.6% in 2026, down from 5% last year.
The IMF left its U.S. growth forecast unchanged at 2.3%, saying stronger oil exports and continued investment in artificial intelligence are helping support economic activity.
The IMF urged central banks and other policymakers to remain focused on maintaining price stability while assessing the effects of volatile commodity markets and growing investment in artificial intelligence technologies, according to the New York Times.
