The International Monetary Fund lowered its projection for global expansion on Tuesday, citing increases in energy prices and supply interruptions associated with the war in Iran. The fund cautioned that if the conflict were to intensify and crude oil remained above $100 per barrel through 2027, the global economy could approach recession.
At the IMF's spring meetings in Washington, held alongside World Bank officials, the institution released three alternative growth pathways tied to possible developments in the Middle East. The scenarios are labeled reference, adverse and severe, and are intended to map out outcomes depending on the trajectory of the conflict.
In the IMF's most optimistic path - the reference scenario, which assumes a short-lived Iran war - the fund now expects real global GDP to rise 3.1% in 2026. That projection is 0.2 percentage point lower than the forecast issued in January. Under this scenario the IMF anticipates average oil prices of $82 per barrel for 2026, a decline from recent Brent futures levels that have traded near $100 per barrel.
The IMF also estimated the counterfactual: absent the Middle East conflict, the fund said it would have upgraded its 2026 growth outlook by 0.1 percentage point to 3.4%. That stronger outcome would be supported, the IMF noted, by continued investment in technology, lower interest rates, less severe U.S. tariffs and fiscal support in some countries.
IMF chief economist Pierre-Olivier Gourinchas emphasized the scale of the risk posed by the Gulf fighting. "What's happening in the Gulf is potentially much, much larger, and that's what our scenarios are kind of documenting," he said, underlining the potential for much broader economic disruption than other recent policy shocks.
The fund's trio of scenarios - reference, adverse and severe - provide a range of outcomes tied directly to energy market responses and the duration and intensity of disruptions. The reference case assumes relatively contained impacts; the adverse and severe scenarios map progressively larger shocks to supply and prices.
By publishing these pathways at its spring meetings, the IMF signals the centrality of energy-market shocks from the Iran war to near-term global growth prospects and highlights the narrow conditions under which the world economy avoids a sharper slowdown.