The IMF projects global economic growth of 3% in 2026, noting that rising AI demand will partially counterbalance the energy shock stemming from the Iran conflict.
The IMF has reduced its 2026 global growth forecast for the second time this year, pointing to the lingering impact of the energy shock triggered by the US‑Israel conflict with Iran.
According to the IMF’s latest outlook released on Wednesday, the world economy is now forecast to expand by 3% in 2026, down from the April estimate of 3.1%, a modest slowdown that is partially mitigated by stronger AI‑driven demand.
The IMF anticipates growth will rebound to 3.4% in 2027, just shy of the 3.5% average recorded between 2024 and 2025.
Global inflation is projected to climb to 4.7% this year, up from 4.1% in 2025, before receding to 3.9% in 2027, the IMF noted.
The IMF’s latest downgrade followed renewed U.S. strikes on Iran on Tuesday, prompted by attacks on three commercial vessels in the Strait of Hormuz, and preceded a second wave of U.S. bombing raids on Iranian sites on Wednesday.
“The global outlook is being pulled in two opposite directions: the enduring effects of the Middle‑East energy shock and a surge in technology‑driven investment,” said Petya Koeva Brooks, deputy director of the IMF’s research department, during a news briefing on the outlook.
“Recent overnight developments underscore the uncertainty and risks clouding the outlook,” Brooks added.
The IMF’s projection assumes that the Strait of Hormuz will start to reopen in mid‑July, with conditions expected to revert to pre‑conflict levels by March.
Shipping through the strait, which previously handled roughly one‑fifth of global oil and liquefied natural gas trade, remains tightly constrained due to the persistent threat of Iranian attacks.
Kpler recorded only 41 verified transits through the strait on Tuesday, far below the pre‑war average of about 130 crossings per day.
After dipping to pre‑war levels last week, oil prices have surged anew following the resumption of U.S. strikes on Iran.
On Wednesday, U.S. President Donald Trump declared that the U.S.–Iran ceasefire was effectively over, just hours before the Pentagon launched a second day of strikes on Iranian targets.
Brent crude, the primary global benchmark, jumped as much as 7% after Trump’s comments and the latest strikes, briefly surpassing $79 per barrel.
As of 02:30 GMT, Brent September futures were trading at $78.76 per barrel, nearly $8 higher than the level recorded a week earlier.
“Oil’s rebound toward pre‑war levels indicated that markets were betting on a best‑case scenario for the U.S.–Iran agreement, even though it rests on little more than a high‑level memorandum of understanding,” said Fabien Yip, a market analyst at IG in Sydney, in a client note.
“This week’s renewed escalation highlights how fragile that assumption proved to be and how swiftly sentiment can shift when tested. In the near term, the risk premium from heightened tensions is likely to keep oil prices elevated, although a full repeat of the earlier price spike appears unlikely for the time being.”
In its Wednesday outlook, the IMF projected that the United States will post the fastest growth among major advanced economies this year.
U.S. GDP is forecast to expand by 2.3%, compared with 0.9% for the eurozone, 1.0% for the United Kingdom, 1.1% for Canada, and 0.6% for Japan.
China, classified as an emerging economy, is expected to grow by 4.6%.
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