IMF Cuts Global Growth Outlook Amid Middle East Conflict Risks

The International Monetary Fund (IMF) has lowered its global growth outlook, citing rising energy prices driven by the ongoing Middle East conflict and continued disruptions to shipping through the Strait of Hormuz. The revision comes as global financial leaders gather for the IMF and World Bank Spring Meetings in Washington amid heightened uncertainty.

The IMF outlined three potential growth scenarios, reference, adverse and severe, depending on how the conflict evolves. Its baseline “reference forecast” assumes a short-lived disruption, with oil prices stabilising in the second half of 2026 and averaging $82 per barrel for the year.

However, the outlook may already be outdated. IMF Chief Economist Pierre-Olivier Gourinchas noted that prolonged energy disruptions and the absence of a clear resolution are pushing the global economy closer to the “adverse scenario.” This scenario projects oil prices at around $100 per barrel in 2026 before easing to $75 in 2027, with global growth slowing to 2.5% from 3.4% in 2025.

In a worst-case scenario, the global economy could approach recession, with oil prices rising sharply to $110 per barrel in 2026 and $125 in 2027, significantly increasing economic strain.

Gourinchas stated that current conditions place the global economy between the baseline and adverse scenarios, warning that continued energy market disruptions could further weaken growth prospects.

The IMF added that without the conflict, global growth could have been revised upward slightly to 3.4%, supported by strong technology investments, easing interest rates, reduced trade tensions and fiscal support in several economies.

Source: Reuters