The International Monetary Fund (IMF) has adjusted its forecast for global economic growth, as the Iran conflict causes significant energy disruptions. Despite this, increased investment in artificial intelligence and other technologies is helping to mitigate some adverse effects.
The IMF anticipates the world economy will grow by 3% in 2026, a slowdown from 3.5% last year and slightly below the 3.1% forecast in April for the current year. However, growth is expected to pick up again to 3.4% in 2027.
Iran’s response to U.S. and Israeli strikes on February 28 involved closing the Strait of Hormuz, a crucial passage for a significant portion of global crude oil and natural gas. This action resulted in a sharp spike in energy prices, affecting both businesses and individuals. The IMF predicts oil prices will rise by nearly 32% this year, with consumer price inflation reaching 4.7% in 2026, up from 4.1% in 2025, halting progress in fighting inflation.
The IMF’s projections assume the re-opening of the Strait of Hormuz, notwithstanding the resumption of U.S. strikes and President Donald Trump’s declaration that the ceasefire is over. The forecast also expects trade through the strait to normalize by March next year.
“The world economy has weathered the shock from the war better than feared,”
said Petya Koeva Brooks, IMF’s deputy director for research. Countries utilized existing oil reserves while non-Persian Gulf oil exporters increased production, lessening the conflict’s impact.
Energy-producing nations and those benefiting from AI investments are shielded from the economic damage caused by the war. The United States, for example, is expected to maintain robust growth, with projections at 2.3% this year, up from 2.1% in 2025. Factors such as recent tax cuts, productivity advancements, and a healthy stock market improve its economic prospects.
In contrast, European nations using the euro face challenges from escalated energy costs, with a projected growth of 0.9% this year, a decline from 1.4% last year. China, the second-largest global economy, is forecast to expand by 4.6%, lower than the 5% in 2026, but exceeds earlier expectations from April, buoyed by public infrastructure investments and technological manufacturing.
India remains the fastest-growing major economy globally, predicted to grow at 6.4% due to strong consumer expenditure, despite a slight decrease from last year’s 7.7%.
The IMF, composed of 191 member nations, aims to foster economic development, stability, and poverty reduction worldwide.