IMF: War Darkens Global Economic Outlook and Reshapes Policy Priorities in IMF/OECD News 15/04/2026 Despite major trade disruptions and policy uncertainty, last year ended on an upbeat note. The private sector adapted to a changing business environment, while powerful offsets came from lower US tariffs than originally announced, some fiscal support, and favorable financial conditions coupled with strong productivity gains and a tech boom. Despite some downside risks, the momentum was expected to carry over into 2026, lifting the pre-conflict global growth forecast to 3.4 percent. War in the Middle East has halted this momentum. The closing of the Strait of Hormuz and serious damage to critical facilities in a region central to global hydrocarbon supply raise the prospect of a major energy crisis should hostilities continue. War’s economic impact The shock’s ultimate magnitude will depend on the conflict’s duration and scale—and how quickly energy production and shipment normalize once hostilities end. This impact will depend on three channels. First, higher commodity prices are a textbook negative supply shock, raising costs for energy‑intensive goods and services, disrupting supply chains, lifting headline inflation, and eroding purchasing power. Second, these effects could be amplified as firms and workers try to recoup losses, risking wage‑price spirals, especially where inflation expectations are poorly anchored. Third, heightened macro risks and the prospect of tighter monetary policy could trigger a sudden repricing by financial markets—with much lower asset valuations, higher risk premia, more capital flight, and dollar appreciation—tightening financial conditions and dampening aggregate demand. Our reference forecast, which assumes a short-lived conflict and a moderate 19 percent increase in energy commodities prices in 2026, still puts global growth at only 3.1 percent this year and headline inflation at 4.4 percent, a sharp deviation from the global disinflation trend in recent years. A longer shutdown of the Strait of Hormuz and further damage to drilling and refining facilities would disrupt the global economy more deeply and for longer. In an adverse scenario, assuming a sharper increase in energy prices this year coupled with rising inflation expectations and some tightening of financial conditions, growth falls to 2.5 percent this year and inflation rises to 5.4 percent. In a severe scenario where energy supply dislocations extend into next year, inflation expectations become markedly less anchored, and financial conditions tighten sharply, global growth would decline to 2 percent this year and next, while inflation would exceed 6 percent. Despite the recent news of a temporary ceasefire, some damage is already done, and the downside risks remain elevated. Countries will feel the impact differently. As in past commodity-price surges, importers are highly exposed. Low-income and developing economies—especially those with vulnerabilities and limited buffers—are likely to be hit hardest. Gulf energy exporters will face economic fallout from damaged infrastructure, production disruptions, export constraints, and weaker tourism and business activity. Remittances will fall in countries that supply migrant workers to the region. Lessons from 2022 crisis Today’s shock echoes the 2022 commodity price surge following Russia’s invasion of Ukraine, which helped push global inflation to the highest since the 1970s. In that episode, th