The head of the International Monetary Fund has warned that the war involving Iran is pushing the global economy toward a dangerous mix of higher inflation and slower growth, as energy disruptions and supply chain strains force the institution to prepare fresh downgrades to its outlook.
Kristalina Georgieva, managing director of the IMF, said the economic consequences of the conflict were now unavoidable, warning that “all roads now lead to higher prices and slower growth” as the shock ripples through oil, gas, transport and food markets.
Her comments come as the IMF heads into its Spring Meetings next week in Washington under mounting pressure to reassess the global outlook after the conflict in the Middle East upended expectations that 2026 would bring modest improvement in growth and easing inflation. The fund had previously expected to slightly upgrade its forecasts before the war, but is now expected to revise them downward.
Before the latest escalation, the IMF’s January World Economic Outlook update had projected global growth of 3.3 percent in 2026 and 3.2 percent in 2027, reflecting what it then described as a resilient world economy despite trade tensions and geopolitical uncertainty. Those projections are now likely to be cut as the energy shock worsens and confidence weakens.
The central driver of the deterioration has been the disruption to energy flows caused by the war and the effective closure of the Strait of Hormuz, one of the world’s most important shipping chokepoints for oil and gas. The IMF said the conflict had caused one of the largest energy supply disruptions in modern history, with global oil production down 13 percent and wider knock-on effects hitting fertiliser, gas and food supply chains.
Although some tanker traffic has resumed through the strait in recent days, volumes remain far below normal levels, underscoring the fragility of the situation and the risk that any further escalation could deepen the shock. Financial markets have remained on edge, while oil prices have surged and central banks are increasingly worried that inflation could prove more stubborn than expected.
For policymakers, the concern is not only that prices are rising again, but that growth is slowing at the same time — a combination that revives fears of stagflation, a painful scenario in which economies lose momentum even as households and businesses face mounting costs.
The burden is expected to fall most heavily on poorer and energy-importing countries, many of which have little room left to absorb another external shock after years of debt strain, pandemic after-effects, climate pressures and tighter global financing conditions. Georgieva warned that countries without adequate reserves or fiscal buffers would be particularly exposed to the jump in import costs and the risk of social tension.
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That warning is especially relevant for many African economies, which are heavily dependent on imported fuel, fertiliser and food and are already grappling with fragile currencies and elevated borrowing costs. Even countries that benefit from higher commodity prices may still face inflationary spillovers and weaker demand from trading partners if global growth slows sharply.
The crisis is also reshaping the agenda for the IMF and World Bank Spring Meetings, where ministers, central bankers and development officials are now expected to focus heavily on the fallout from the conflict and on how to support vulnerable economies facing a fresh cost-of-living squeeze. The IMF, World Bank and International Energy Agency have already launched a joint coordination effort to respond to the energy and economic fallout.
While Georgieva said the world would eventually recover from the latest shock, her message was that the global economy is entering a more fragile and unpredictable era — one in which war, trade friction, climate shocks and geopolitical rivalry are making inflation harder to tame and growth more difficult to sustain.
