IMF Warns War in the Middle East Could Derail Global Growth
The ongoing conflict in the Middle East is threatening to undo years of fragile economic recovery, the International Monetary Fund said Tuesday, warning that rising energy costs and supply disruptions could ripple across the global economy.
The fund’s latest projections show a clear shift from a relatively stable growth path to one now clouded by uncertainty. After weathering the pandemic, inflation shocks and the war in Ukraine without tipping into recession, the global economy is once again facing serious risks.
“The global outlook has abruptly darkened following the outbreak of war in the Middle East,” Pierre-Olivier Gourinchas, the IMF’s chief economist, wrote.
“The war interrupted what had been a steady growth trajectory. Prior to the war, we were poised to upgrade our global growth forecast, reflecting continued momentum in the global economy supported by a tech investment boom, some moderation in trade policy tensions, fiscal support in some countries, and accommodating financial conditions. War in the Middle East will overwhelm these underlying forces.”
Even in a best-case scenario, where the conflict is contained and short-lived, the IMF. expects noticeable damage. Global growth is now projected at 3.1 percent this year, down from both last year’s pace and earlier forecasts made before the fighting disrupted oil shipments through the Strait of Hormuz.
The timing of the warning is significant. Officials from around the world have gathered in Washington for the spring meetings of the IMF. and the World Bank, where the agenda has quickly shifted. Topics like artificial intelligence and trade tensions have taken a back seat to the economic consequences of war.
So far, markets have reacted most sharply in energy. Oil has surged past $100 a barrel, natural gas prices have jumped more than 80 percent and fertilizer costs are climbing, a combination that could squeeze both consumers and farmers.
Those price increases are expected to spread through the broader economy, pushing up the cost of goods like steel and cement while reducing household purchasing power. Central banks, the IMF. warned, may be forced to respond by keeping interest rates higher for longer.
“Under our severe scenario—assuming dislocations in energy markets that extend to next year, together with a de-anchoring of inflation expectations and a tightening of financial conditions, the global economy would come close to experiencing a recession, with growth around 2 percent this year and next and global headline inflation near 6 percent. Clearly, the downside risks are tremendous.”
The effects will not be evenly distributed. Lower-income countries and developing economies are expected to feel the greatest strain, particularly those already vulnerable to food and energy price swings. Some oil-exporting countries in the Persian Gulf may also face direct damage to infrastructure and exports.
Wealthier economies may be more resilient, but they are not immune. The IMF. now forecasts U.S. growth at 2.3 percent in 2026, an improvement over the previous year, but still weaker than earlier expectations. The White House, by comparison, has projected 3.5 percent growth.
For American consumers, the impact is already visible at the pump. Gas prices have climbed to a national average of $4.11 per gallon.
Russia, meanwhile, appears to be benefiting from the turmoil. Higher oil prices and a temporary easing of U.S. sanctions on some of its exports have improved its outlook, with growth expected to edge up slightly in 2026.
Amid these developments, U.S. Treasury Secretary Scott Bessent used the IMF-World Bank meetings to push for a different focus. Speaking at an event alongside the gatherings, he urged the institutions to prioritize their core responsibilities and address long-standing global imbalances.
“This slow-motion buildup of global imbalances after a lack of sustainable growth is the biggest risk,” Mr. Bessent said. “The world cannot take a China with a trillion-dollar trade surplus.”
He did not, however, directly address the war itself, even as it reshapes the economic outlook that the meetings were meant to assess.
Moumita Basuroychowdhury is a Contributing Reporter at The National Digest. After earning an economics degree at Cornell University, she moved to NYC to pursue her MFA in creative writing. She enjoys reporting on science, business and culture news. You can reach her at moumita.b@thenationaldigest.com.