IMF cuts global growth forecast during Hormuz blockade

The International Monetary Fund (IMF) has lowered its global economic growth forecast as tensions between the United States and Iran have driven up energy and food costs globally.

The IMF said on Tuesday that it expected the global economy to grow by 3.1 percent this year, a slowdown from its earlier forecast of 3.3 percent, which it had released before the US and Israel began their war on Iran on February 28.

Since then Iran has retaliated by closing the Strait of Hormuz, a critical chokepoint for oil and gas supplies, and has attacked energy infrastructure in the region, driving up oil prices and squeezing oil and gas supplies, developments that have hit countries most reliant on these imports especially hard.

The new report also marks a slowdown from last year, in which the economy expanded by 3.4 percent. Some regions and countries will be hit harder than others, the IMF said.

Iran’s outlook, for instance, saw one of the largest country-level revisions, with an initial small amount of growth forecast in 2026 cut by 7.2 points, resulting in a forecast contraction of 6.1 percent.

The IMF also cut GDP growth forecasts for Saudi Arabia from 4.5 percent to 3.1 percent.

“The current hostilities in the Middle East pose immediate policy trade-offs: between fighting inflation and preserving growth and between supporting those affected by the rising cost of living and rebuilding fiscal buffers,” the IMF said in its World Economic Outlook report.

“It will be highly uneven across countries, hitting countries in the conflict region, commodity-importing low-income countries, and emerging market economies hardest,” Chief Economist Pierre-Olivier Gourinchas said in a release.

For the Middle East and North Africa, the 2026 growth forecast was cut by 2.8 points to 1.1 percent. The IMF slashed its 2026 forecast for the Middle East and Central Asia by 2 percentage points to 1.9 percent.

Meanwhile, in the eurozone, growth is now seen slowing to 1.1 percent this year from 1.4 percent in 2025 and below the 1.3 percent predicted in January.

The lower forecasts were released as the costs of oil, gas and fertilisers 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.

“It is just another confirmation of what we knew, which is that the war in the Middle East is changing the growth trajectory in the immediate term and, if it expands, possibly in the longer term as well,” Aleksandar Tomic, associate dean for strategy, innovation and technology at Boston College, told Al Jazeera.

Inflationary pressures

The IMF said it anticipates higher global inflation at 4.4 percent, up 0.6 percentage points from its January forecast.