A new analysis by the International Monetary Fund states that the war in the Middle East has disrupted global economic momentum, worsening the outlook for growth and inflation and forcing policymakers to make difficult decisions.

The global economy, which showed strong resilience last year due to private-sector adaptation, fiscal support, favorable financial conditions, and a technology-driven productivity boost, was initially projected to grow by 3.4 percent in 2026.

However, this positive trajectory has been derailed by the conflict, which has led to the closure of the Strait of Hormuz and damage to key energy facilities, raising concerns over a potential global energy crisis if the situation continues.

The IMF warned that the overall economic impact will depend on the duration of the conflict and how quickly energy production and shipping operations can return to normal.

The crisis is already affecting the global economy through three key channels.

Firstly, rising commodity prices have created a negative supply shock, increasing production costs, disrupting supply chains, pushing up inflation, and reducing consumer purchasing power.

These pressures could worsen if businesses and workers attempt to recover losses, potentially triggering wage-price spirals, especially in countries with weakly anchored inflation expectations.

Secondly, growing macroeconomic risks and the likelihood of tighter monetary policies may lead to sharp adjustments in asset prices, increased risk premiums, capital outflows, and currency fluctuations, further tightening financial conditions and weakening demand.

According to the IMF’s baseline scenario, which assumes a short-lived conflict and a 19 percent rise in energy prices in 2026, global growth is expected to slow to 3.1 percent, while inflation could rise to 4.4 percent, reversing recent progress in reducing inflation. More severe outcomes remain possible if the conflict escalates.