The IMF’s global growth warning has sharpened concerns about the economic fallout from the Middle East war, with the Fund saying the conflict will likely drive inflation higher and slow global growth. IMF Managing Director Kristalina Georgieva told Reuters that the shock to energy markets has already changed the institution’s outlook ahead of next week’s World Economic Outlook.
The war has triggered the worst disruption ever seen in global energy supply, with millions of barrels of oil production shut in after Iran effectively blocked the Strait of Hormuz. The waterway handles about one-fifth of the world’s oil and gas shipments, making it a critical route for global trade.
Georgieva said the IMF now expects to cut its growth forecast and raise its inflation outlook, even if the conflict ends quickly. She added that, before the war, the Fund had expected a modest upgrade to its global growth projections of 3.3% in 2026 and 3.2% in 2027.
Instead, she said, the global economy now faces a combination of slower growth and higher prices. The IMF plans to publish several scenarios in its World Economic Outlook on April 14, and the conflict is expected to dominate discussions at the IMF and World Bank spring meetings in Washington next week.
Energy shock spreads beyond oil and gas
Georgieva said the war has reduced global oil supply by 13%, with the effects spilling into gas shipments and related supply chains, including helium and fertilisers. She warned that even a rapid end to the fighting would leave a lasting negative impact on the broader world economy.
Brent crude settled near $110 on Monday, while Middle East-sourced cash benchmarks traded at a significant premium. That jump followed Iran’s effective closure of the Strait of Hormuz after the February 28 attacks by the US and Israel.
Georgieva said poorer energy-importing countries with little or no fiscal space will likely suffer the most. She warned that rising fuel costs could increase the risk of social unrest in vulnerable economies that cannot easily shield their populations from higher prices.
Read: Oil Prices Rise as Iran War Threatens Middle East Supply
She added that some countries have already asked the IMF for funding, though she did not name them. At the same time, she urged governments to avoid broad energy subsidies, arguing that such measures could worsen inflationary pressure.
Beyond energy, the IMF is also working with the World Food Programme and the Food and Agriculture Organisation on food security risks. Georgieva said the IMF does not yet see a full food crisis, but warned that disruptions to fertiliser deliveries could change that.
Qatar expects it may need three to five years to restore 17% of its natural gas production after damage from Iranian strikes, while the International Energy Agency has reported damage to 72 energy facilities during the war. Together, those losses underline how quickly the economic shock could deepen if the conflict continues.
