IMF trims 2026 growth forecast, sees rebound after Middle East war shock

The International Monetary Fund nudged its 2026 global growth forecast down to 3.0% and still expected 3.4% growth in 2027, framing the path as a “V-shaped recovery” after the Middle East war shock. The Fund also raised its 2026 global headline inflation forecast to 4.7%, up from 4.4% in April, and said inflation should ease to 3.9% in 2027.

That combination points to a squeeze that households can feel in everyday prices. The IMF said the disinflation trend that had been in place since early 2024 had stalled, while energy prices remained elevated after the war disrupted supply routes and sent shockwaves through oil markets. It assumed the Strait of Hormuz would begin reopening in mid-July and normalize by March 2027, with average oil at $89 a barrel in 2026. If that timetable slips, the first pressure points would be fuel, freight and food costs, especially in countries that import energy and in lower-income economies with less room to absorb the hit.

The Fund said the outlook was being pulled in opposite directions by two large forces: the energy shock from war in the Middle East and a technology-driven investment boom. In practice, that means the global economy is no longer moving in one direction. Countries and sectors tied closely to the technology value chain were among the brighter spots, while commodity importers without meaningful AI exposure were downgraded. The IMF said world growth had so far avoided a sharper slowdown because demand in the technology sector had cushioned some of the damage from higher energy prices and war-related disruption.

The revision also matters for jobs and borrowing costs. Slower global growth tends to show up first in export-driven industries, shipping, manufacturing and other sectors that depend on cross-border demand. The IMF said global trade growth was projected to slow to 3.5% in 2026 from 5% in 2025 before rebounding to 4.3% in 2027, a sign that trade-sensitive sectors could face a softer year before any recovery takes hold. Higher inflation, meanwhile, gives central banks less room to ease aggressively if price pressures remain sticky.

The July forecast was only slightly weaker than April’s, when the IMF had projected 3.1% growth in 2026 and 3.2% in 2027. But the Fund said risks still leaned to the downside, with renewed conflict, financial market repricing, trade fragmentation and a reassessment of AI profitability all capable of dragging growth lower. Its April 8 joint statement with the World Bank Group and World Food Programme on the war’s economic and food-security effects underscored how quickly a geopolitical shock can move from markets into dinner-table budgets.