The International Monetary Fund on Tuesday lowered its global growth forecast, warning that the ongoing Iran war has disrupted economic momentum and is likely to push inflation higher worldwide.

In its latest World Economic Outlook, the IMF projected global growth at 3.1% for 2026, down from the 3.3% forecast in January. The figure also reflects a slowdown from the estimated 3.4% growth in 2025.

The downgrade comes as US and Israeli strikes on Iran, along with Tehran’s closure of the Strait of Hormuz and retaliatory attacks on regional energy infrastructure, have driven up global oil and gas prices.

As a result, the IMF raised its global inflation forecast to 4.4% this year, compared to 4.1% in 2025 and its earlier estimate of 3.8% for 2026.

Before the conflict, the global economy had shown resilience despite protectionist trade policies introduced by Donald Trump, including tariffs on imports. A strong technology sector, driven by investments in data centres and artificial intelligence, had also supported growth.

“War in the Middle East has halted this momentum,” IMF Chief Economist Pierre-Olivier Gourinchas wrote in an accompanying blog post.

The IMF’s baseline outlook assumes the conflict will be short-lived and that energy prices will rise by around 19% this year. However, in a more severe scenario where disruptions persist and central banks raise interest rates to curb inflation, global growth could fall to 2% in both 2026 and 2027.

“Despite the recent news of a temporary ceasefire, some damage is already done, and the downside risks remain elevated,” Gourinchas added.

The fund slightly reduced its US growth forecast to 2.3% for this year. Growth in the eurozone is expected to slow to 1.1%, down from 1.4% in 2025, as higher natural gas prices weigh on the region.

Lower-income, energy-importing countries are expected to be hit hardest, with Sub-Saharan Africa’s growth forecast cut to 4.3% from 4.6% projected earlier.

Meanwhile, Russia could benefit from higher energy prices, with the IMF slightly raising its growth outlook to 1.1% despite ongoing sanctions following its invasion of Ukraine.

Andriy Pyshnyy said rising fuel costs linked to the Iran conflict are also affecting Ukraine, pushing inflation to 7.9% in March, above earlier projections. He warned that fuel prices could further increase inflation by up to 2.8 percentage points.

“We are trying to walk on a razor blade,” he said, highlighting the challenges facing Ukraine’s economy amid ongoing war with Russia.

The IMF, a 191-nation lending organisation, works to promote global economic stability and reduce poverty.