The International Monetary Fund (IMF) has lowered its global economic growth forecast, citing that tensions between the United States and Iran have driven up energy and food costs worldwide. On Tuesday, the IMF said it expects the global economy to grow by 3.1 percent in 2026, down from its earlier forecast of 3.3 percent and slowing from the 3.4 percent expansion in 2025. The downgrade is largely linked to events following the US and Israel's war on Iran that began on February 28.

Iran retaliated by closing the Strait of Hormuz and attacking energy infrastructure in the region, which has raised oil prices and squeezed oil and gas supplies. These developments have hit countries most reliant on imports particularly hard. In the IMF report, for instance, Iran's outlook was revised to a forecast contraction of 6.1 percent in 2026, a 7.2-point cut from an initial small growth forecast. GDP growth forecasts for Saudi Arabia were cut from 4.5 percent to 3.1 percent.

IMF Chief Economist Pierre-Olivier Gourinchas said in a release that the conflict will hit countries in the Middle East region, commodity-importing low-income countries, and emerging market economies hardest. The growth forecast for the Middle East and North Africa in 2026 was cut by 2.8 points to 1.1 percent, while for the Middle East and Central Asia it was slashed by 2 percentage points to 1.9 percent. In the eurozone, growth is now seen slowing to 1.1 percent this year from 1.4 percent in 2025.

The lower forecasts were released as the costs of oil, gas, and fertilizers surge alongside a slowdown in traffic in the Strait of Hormuz, through which roughly 20 percent of the world's oil and liquefied natural gas supplies travel. Associate Dean for Strategy, Innovation and Technology at Boston College Aleksandar Tomic told Al Jazeera that the war is changing the growth trajectory and could expand further. The IMF anticipates higher global inflation at 4.4 percent, up 0.6 percentage points from its January forecast.

Experts argued that continued strains in the Strait of Hormuz could worsen inflationary pressures in the months to come. Professor of International Business at American University Babak Hafezi told Al Jazeera that for every $10 sustained increase in gas prices per barrel, GDP growth decreases by about 0.4 percent, potentially putting the US in recession territory. Petrol prices in the US have continued to rise, averaging $4.11 per gallon, but oil prices dropped on Tuesday on hopes that Iran would resume talks with the US, though they remain much higher than pre-war levels.

Source: www.aljazeera.com