War in the Middle East has upended the world economy, the International Monetary Fund said on Tuesday, warning in a report that disruptions to oil markets could slow growth, fuel inflation and raise the possibility of a global recession.
The sober message came after the global economy had largely weathered a pandemic, Russia’s war in Ukraine and soaring inflation without tipping into a recession. But President Trump’s decision to initiate a war in Iran has stopped the world economy in its tracks.
In its latest World Economic Outlook, the I.M.F. sharply downgraded its growth forecasts, exposing the economic fallout from a geopolitical crisis that has roiled energy prices and injected a new bout of uncertainty into the global economy.
“The global outlook has abruptly darkened following the outbreak of war in the Middle East,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, wrote in the report. “The war interrupted what had been a steady growth trajectory.”
The I.M.F. said that even if the war is short-lived, the damage to the global economy has been done. In that best-case scenario, the fund expects global growth to fall to 3.1 percent this year from 3.4 percent in 2025. That is down from the 3.3 percent that the fund projected in January. It is also lower than the 3.4 percent growth that it was prepared to project before the war broke out and oil shipments through the Strait of Hormuz were halted.
The forecasts were released as global policymakers arrived in Washington for the spring meetings of the I.M.F. and the World Bank. Just a few weeks ago, the gathering was expected to focus on other disruptions, including trade tensions, artificial intelligence and international fiscal imbalances. It will instead be dominated by the economic fallout of the war.
The conflict has sent oil prices above $100 per barrel. Natural gas has spiked more than 80 percent, and surging fertilizer prices are raising costs for farmers.
The I.M.F. laid out several scenarios for how the war could play out economically. The most severe case involves disruptions to energy markets that extend into next year. Such a scenario would drag global growth down to 2 percent and send inflation up to 6 percent.
“The downside risks are tremendous,” Mr. Gourinchas said.
Even a more optimistic case, in which the war concludes expeditiously and the Strait of Hormuz reopens, will leave behind economic carnage. The I.M.F. estimates that oil prices will increase by 21.4 percent this year and that energy commodity prices, which the fund had said would decline in 2026, will instead rise by 19 percent this year.
Those higher commodity prices will flow through the economy, the I.M.F. warned. That would raise costs of energy-intensive goods such as steel and cement, erode the purchasing power of consumers and most likely require central banks to raise interest rates.
The I.M.F. expects the economic impact of the war to be more damaging to low-income and developing economies and Persian Gulf energy exporters that are facing infrastructure damage and export disruptions from the war.
Advanced economies, such as the United States, are expected to fare better but not emerge unscathed. The I.M.F. now projects U.S. output to rise to 2.3 percent in 2026. That is an increase from 2.1 percent growth in 2025, but slower than the 2.4 percent growth that the fund projected in January.
The White House projected 3.5 percent gross domestic product growth in 2026 in its latest budget forecasts.
In the United States, the most apparent economic vulnerability appears to be the hit that consumers are feeling from higher gas prices. The national average for a gallon of gas was $4.11 as of Tuesday.
According to the I.M.F. report, the biggest winner from the war thus far appears to be Russia, whose economy is now expected to grow 1.1 percent in 2026, up from 1 percent in 2025.
Higher oil prices and the temporary lifting of U.S. sanctions on some Russian oil sales brightened the outlook for its economy.
Alan Rappeport is an economic policy reporter for The Times, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters.
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