The International Monetary Fund said the conflict in the Middle East is poised to exacerbate economic disparities across Latin America and the Caribbean, offering some near-term benefits to oil exporters while worsening conditions for tourism-dependent Caribbean economies and energy-importing countries in Central America.
The warning came in a blog post released alongside the IMF's updated World Economic Outlook, which projects regional growth of 2.3% in 2026 - nearly unchanged from 2.4% in 2025 - and a pickup to 2.7% in 2027. The lender's outlook also included country-level growth forecasts, with Brazil expected to expand 1.9% this year and Mexico 1.6%.
According to the IMF, the region entered 2026 in relatively solid shape, with inflation near target in many economies and growth tracking close to trend. That favorable starting point, however, has been undercut by the conflict, which the IMF characterized as a new external shock. The lender highlighted swings in market sentiment, tighter financing conditions and sharp commodity price movements as channels through which the war is affecting the region.
Commodity markets have been volatile. On Friday, both Brent and WTI crude oil prices fell by more than 10% after Iran's foreign minister said passage for all commercial vessels through the Strait of Hormuz was open during a ceasefire. Despite that single-day drop, the IMF noted that both benchmarks are up roughly 45% so far in 2026.
The IMF identified oil-producing countries in the region as the clearest short-term beneficiaries. Argentina, Brazil, Colombia, Ecuador, Guyana, Trinidad and Tobago and Venezuela were cited as having gained from higher energy prices, which have increased export revenues, supported public finances and eased pressures on external accounts. The fund cautioned, however, that households in these economies still face higher fuel and food costs.
By contrast, the lender said the most severely affected economies are likely to be Caribbean nations that depend heavily on tourism. The IMF pointed to a combination of high public debt and large energy import bills in those markets, making them particularly vulnerable to another surge in oil prices.
Central America is also exposed to the fallout from pricier energy. The IMF said the region faces a broad negative impact from costlier fuel, although it acknowledged that increased use of renewable energy in some countries could provide partial relief.
More broadly, the IMF warned that the regional story will not be one of growth alone. It expects inflation to rise as higher fuel, transport and food costs filter through to consumers, exerting the greatest pressure on lower-income households. The fund also cautioned that countries heavily reliant on foreign financing could face additional strain as investor risk appetite becomes more guarded.
Specific inflation projections from the IMF show a slight rise in 2026: inflation in the region is expected to increase to 6.6% this year from 6.5% in 2025, before easing to 4.2% in 2027.
In its guidance to policymakers, the IMF urged governments and central banks not to abandon the credibility they established after the post-pandemic inflation surge. It said countries with stronger public finances and clearer policy frameworks will be best positioned to absorb the shock. The fund also warned against broad-based fuel or food subsidies, arguing that any support measures should be narrowly targeted to vulnerable families and businesses.
Context and implications
- The IMF view underscores a regional split in which energy exporters gain temporary fiscal and external account relief while importers and tourism-heavy economies face mounting pressures.
- Rising commodity prices and heightened market volatility could translate into tighter financing conditions for countries that depend on external capital.
- Policymakers are being advised to preserve policy credibility and to focus any support on the most vulnerable, rather than deploying broad subsidies that could weaken public finances.