IMF cuts 2026 world growth forecast, citing Iran war fallout

Global economy to grow 3 percent in 2026, as AI demand partly offsets energy shock from Iran war, IMF says.The International Monetary Fund (IMF) has cut its 2026 global growth forecast for the second time this year, citing the “lingering effects” of the energy shock caused by the US-Israel war on Iran.The global economy is expected to grow 3 percent in 2026, down from April’s forecast of 3.1 percent, a “modest slowdown” partly offset by AI-driven demand, the IMF said in its latest outlook, released on Wednesday.Recommended Stories list of 4 itemslist 1 of 4Justin Bieber joins Madonna, Shakira, BTS in World Cup final halftime showlist 2 of 4Indonesia’s free meals programme plagued by alleged corruption and wastelist 3 of 4US expands military strikes on Iran after Trump says he’ll ‘hit them hard’list 4 of 4Wildcard Fery faces Zverev in Wimbledon semis, as Kostyuk meets Noskovaend of listGrowth is forecast to rebound to 3.4 percent in 2027, just below the 2024-25 growth average of 3.5 percent, the IMF said.Global inflation is expected to reach 4.7 percent this year, up from 4.1 percent in 2025, before easing to 3.9 percent in 2027, according to the Washington, DC-based financial institution.The IMF’s latest downgrade came after the United States on Tuesday renewed strikes on Iran following attacks on three commercial ships in the Strait of Hormuz, but before US forces launched a second round of bombing raids on Iranian targets on Wednesday.“The global outlook is being shaped by two powerful forces pulling in opposite directions: the lingering effects of the energy shock from the war in the Middle East and a technology-driven investment boom,” Petya Koeva Brooks, deputy director of the IMF’s research department, said in a news conference about the outlook.“Developments overnight illustrate the uncertainty and risks that surround the outlook,” Brooks said.The IMF forecast assumes that the Strait of Hormuz begins reopening in mid-July, with conditions returning to a “pre-war state” by March.