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The International Monetary Fund (IMF) cut its 2026 global growth projection on Tuesday, warning that the world economy could be \u201cthrown off course\u201d by war<\/a> in the Middle East \u2014 as the conflict roils commodity markets and sparks higher prices.<\/p>\n The global economy is set to grow by 3.1 per cent this year, said the IMF in its World Economic Outlook report<\/a>, released during its spring meetings in Washington.<\/p>\n \n <\/a>\n <\/p><\/blockquote>\n <\/span><\/div>\n<\/figure>\n This is down from 3.3pc forecast in January before hostilities erupted<\/a> on February 28 with US-Israeli strikes against Iran that prompted Tehran\u2019s retaliation and sparked a broader conflict in the region.<\/p>\n \u201cWe were planning to upgrade growth for 2026 to 3.4pc\u201d if not for the war, IMF chief economist Pierre-Olivier Gourinchas told AFP<\/em>.<\/p>\n Prices of oil, gas and fertilisers have surged, as Iran virtually blocked traffic through the Strait of Hormuz, a key shipping waterway. US President Donald Trump has also ordered a naval blockade<\/a> around Iran\u2019s ports.<\/p>\n The IMF expects higher inflation this year at 4.4pc, 0.6 percentage points above its January forecast.<\/p>\n Still, the impact of oil shortages could be worse.<\/p>\n Compared to the oil shocks of the 1970s, \u201cthe global economy is much less oil dependent now than it was back then,\u201d Gourinchas said at a Tuesday press conference.<\/p>\n \u201cThere are many other sources of energy, renewables, nuclear and other things, and also the global economy has become much more efficient in terms of how much it needs oil to produce GDP,\u201d he said. \u201cThat\u2019s a source of resilience.\u201d After this, the \u201cdisinflation path\u201d of recent years should reassert itself, Gourinchas said.<\/p>\n But these projections assume a relatively short-lived conflict with temporary energy market disruptions.<\/p>\n In more adverse scenarios where energy prices remain steep, global growth could slow to 2.5pc or even around 2.0pc.<\/p>\n \u201cThis latest shock comes less than a year since the shift in US trade policies, and the transition to a new international trade system is still ongoing,\u201d the IMF said.<\/p>\n A year ago, Trump unleashed sweeping tariffs <\/a>on US trading partners, rocking financial markets and snarling supply chains.<\/p>\n Some of the tariffs have been struck down by the Supreme Court, but uncertainty lingers as Trump moves to reimpose duties via other means.<\/p>\n Although overall revisions to global growth and inflation appear modest, the IMF cautioned that the war has taken a bigger toll on the Middle East and \u201cvulnerable economies\u201d elsewhere.<\/p>\n \u201cThe impact on emerging market and developing economies would be almost twice that on advanced economies,\u201d the fund said.<\/p>\n Higher energy and fertiliser costs could bring steeper food prices, mainly hitting low-income energy importers, Gourinchas said.<\/p>\n Growth projections this year for the Middle East and central Asia were cut by around half to 1.9pc.<\/p>\n Saudi Arabia, the Middle East\u2019s biggest economy, is set to see 3.1pc growth this year, down 1.4 percentage points from January\u2019s expectation.<\/p>\n Among the world\u2019s two biggest economies, US growth is still set to accelerate to 2.3pc this year, although the pace of growth was revised slightly lower.<\/p>\n \u201cThe US at the margin is benefiting from higher energy prices,\u201d Gourinchas said. But gasoline prices have also jumped for consumers.<\/p>\n China\u2019s growth is anticipated to cool to 4.4pc, a touch below the January forecast, too. The IMF flagged an underlying \u201cunevenness\u201d in both economies.<\/p>\n Domestic activity lags behind exports in China, while a strong showing in the United States has been accompanied by low employment growth.<\/p>\n Euro area growth was revised 0.2 points down to 1.1pc for 2026.<\/p>\n While the IMF does not expect inflation expectations to go off-track, there is concern that they may not be as well-anchored as before.<\/p>\n Past inflation episodes remain fresh in the public\u2019s minds, and firms might act to restore margins more quickly than before. \u201cIf that happens, then you can get much more persistent inflation going on, which would be reflected in higher inflation expectations,\u201d Gourinchas said.<\/p>\n Central banks might then need to step in and raise interest rates to cool the economy, despite ongoing negative supply shocks.<\/p>\n<\/p>\n <\/div>\n<\/figure>\n<\/a>Uneven impact<\/h2>\n