International lender warns prolonged oil market disruptions could weigh on inflation and economic recovery
WASHINGTON: The International Monetary Fund (IMF) has reduced its global economic growth forecast for 2026 for the second time this year, citing the lingering effects of the energy shock triggered by the US-Israel conflict with Iran.
In its latest World Economic Outlook, released on Wednesday, the IMF projected global growth at 3.0 percent in 2026, down from its April estimate of 3.1 percent. Despite the downgrade, the institution said expanding investment in artificial intelligence is expected to cushion part of the slowdown.
The IMF forecasts global growth will recover to 3.4 percent in 2027, slightly below the average growth rate recorded during 2024 and 2025. Meanwhile, global inflation is expected to reach 4.7 percent this year before easing to 3.9 percent by 2027.
Energy disruptions remain major concern
The revised outlook reflects continuing uncertainty surrounding energy markets following renewed military tensions in the Middle East. IMF Deputy Director of Research Petya Koeva Brooks said the global economy is being shaped by two opposing forces: persistent energy market disruptions and strong technology-driven investment.
The IMF assumes that shipping through the Strait of Hormuz will gradually resume from mid-July and return to pre-conflict conditions by March next year. However, maritime traffic remains well below normal levels because of ongoing security concerns, limiting global oil and liquefied natural gas exports.
Oil prices and growth outlook
Brent crude prices climbed sharply after renewed US military strikes on Iran, briefly rising above $79 per barrel. Analysts said the escalation highlighted the fragile nature of market expectations surrounding regional stability.
The IMF expects the United States to remain the fastest-growing major advanced economy this year, forecasting GDP growth of 2.3 percent. It projects growth of 0.9 percent for the Eurozone, 1.0 percent for the United Kingdom, 1.1 percent for Canada, 0.6 percent for Japan, and 4.6 percent for China.
The IMF cautioned that geopolitical tensions, energy supply risks and inflationary pressures continue to pose significant challenges to the global economic outlook.
