IMF Cuts Global Growth Forecast to 3.1% as Hormuz Blockade Drags on the World Economy
The April World Economic Outlook revises global growth down 0.2 points from January, projects Iran contracting 6.1%, and warns that every $10 oil price increase shaves 0.4% off GDP -- with Brent above $95 and US gas at $4.11 a gallon.
The International Monetary Fund cut its global growth forecast for 2026 to 3.1%, down 0.2 percentage points from its January projection, citing the cascading economic effects of the Middle East conflict and the disruption of energy flows through the Strait of Hormuz.
The April World Economic Outlook, released Monday at the IMF's Spring Meetings, projects 2027 growth at 3.2% -- marking a sustained deceleration from the 3.4% achieved in 2025. Global inflation was revised upward to 4.4%, a 0.6 percentage point increase from the January forecast.
"It will be highly uneven across countries, hitting countries in the conflict region, commodity-importing low-income countries, and emerging market economies hardest," the IMF's Chief Economist said.
The Forecast at a Glance
| Economy | 2026 Forecast | Revision from January |
|---|---|---|
| World | 3.1% | -0.2 pp |
| Advanced economies | 1.8% | -- |
| United States | 2.3% | -0.1 pp |
| Eurozone | 1.1% | -0.2 pp |
| China | 4.4% | revised down |
| India | 6.5% | +0.1 pp |
| Emerging & Dev. Asia | 4.9% | -0.1 pp |
| MENA | 1.1% | -2.8 pp |
| Iran | -6.1% |
The Hormuz Effect
The headline story in this WEO is the Strait of Hormuz. Roughly 20% of the world's oil and liquefied natural gas passes through the strait, and the ongoing blockade tied to the US-Iran conflict has sent energy prices surging:
- Brent crude: $95.02 per barrel
- WTI: $91.84
- US retail gasoline: $4.11 per gallon, up from $2.98 on February 28
The IMF estimates that every sustained $10 increase in oil prices reduces global GDP growth by approximately 0.4 percentage points. With oil up roughly $20-25 from pre-conflict levels, that translates to nearly a full percentage point of drag.
Under the IMF's adverse scenario -- an extended conflict with further supply disruption -- global growth would slow to 2.5% in 2026. Under the severe scenario, growth would fall to approximately 2%.
The Divergence
The most striking feature of the forecast is how unevenly the damage is distributed.
Iran faces the largest single revision in the report: a 7.2 percentage point downgrade, from marginal growth to a 6.1% contraction. The combination of sanctions, military operations, and Hormuz disruption has collapsed the Iranian economy.
The Middle East and North Africa as a whole was cut by 2.8 percentage points, and Saudi Arabia's forecast dropped from 4.5% to 3.1% despite being an oil exporter -- reflecting disruption to shipping routes and the broader regional instability.
The eurozone was revised down to 1.1%, well below the 1.4% growth recorded in 2025. The region is particularly exposed to energy price shocks due to its dependence on imported LNG since cutting off Russian pipeline gas.
India was the notable exception, receiving a slight 0.1 percentage point upgrade to 6.5%. The IMF cited the reduction in US tariffs on India from 50% to 10%, which softened the impact of the conflict.
The United States saw only a modest 0.1 percentage point cut to 2.3%, partly insulated by domestic energy production.
What It Means
The 2027 forecast of 3.2% implies the IMF does not expect the conflict's economic effects to fully dissipate next year. The inflation revision -- 4.4% globally, up from 3.8% in January -- suggests central banks face a difficult environment: growth slowing while prices accelerate, the textbook definition of stagflation risk.
The IMF noted that the downward revision to emerging market growth (-0.3 percentage points for 2026) is larger than for advanced economies, meaning the countries least equipped to absorb an oil shock are bearing the heaviest burden.