IMF Cuts Global Growth Outlook as Iran Conflict Drives Inflation Risks

The International Monetary Fund has downgraded its global growth outlook, warning that the Iran conflict is weighing on the world economy, according to Paul Wiseman of the Associated Press (AP).

The downgrade reflects rising oil and gas prices triggered by U.S. and Israeli strikes on Iran, as well as Tehran’s closure of the Strait of Hormuz and retaliatory attacks on regional energy infrastructure. (Photo: Marek Ślusarczyk, Wikimedia Commons)

The IMF now expects global growth to reach 3.1% in 2026, down from its earlier forecast of 3.3% issued in January. The revised outlook also marks a slowdown from 3.4% growth in 2025.

The downgrade reflects rising oil and gas prices triggered by U.S. and Israeli strikes on Iran, as well as Tehran’s closure of the Strait of Hormuz and retaliatory attacks on regional energy infrastructure.

As a result, the IMF raised its global inflation forecast to 4.4% for 2026, up from 4.1% in 2025 and higher than its earlier projection of 3.8%.

Prior to the conflict, the global economy had shown resilience despite protectionist trade policies under Donald Trump. The impact of tariffs was less severe than initially feared, partly because the measures implemented were more moderate than earlier proposals.