IMF cuts 2026 global growth outlook to 3% amid Iran war energy shock

The International Monetary Fund lowered its 2026 global growth forecast to 3 %, down from 3.1 % in April, and raised its headline inflation outlook to 4.7 % for the same year. The downgrade reflects the ongoing energy shock caused by the Iran‑related conflict and trade fragmentation, though a boom in artificial‑intelligence‑related demand provides a modest offset.

Regional projections were also trimmed: Euro‑area growth is now seen at 0.8‑0.9 %; the United Kingdom’s economy is expected to stall, with GDP slipping another 0.1 % in May; the United States is projected to grow 2.3 %, the fastest among major advanced economies; China 4.6 %; Japan 0.6 %; Canada 1.1 %; and Saudi Arabia 1.7 %. Countries at the centre of the AI hardware supply chain – Taiwan, South Korea, Thailand and Malaysia – posted stronger‑than‑expected growth.

“The global outlook is being shaped by two powerful forces pulling in opposite directions: the lingering effects of the energy shock from the war in the Middle East and a technology‑driven investment boom,” said Petya Koeva Brooks, deputy director of the IMF’s research department. The IMF warned that a collapse of a cease‑fire could further weaken the outlook, while AI infrastructure spending enters a multi‑year supercycle backed by billions of dollars from U.S. hyperscalers and large plans in South Korea, Taiwan and Japan.