Iran war could push global economy toward recession, IMF warns

The global economy is at risk of slipping into recession if the US-Israel war with Iran continues and elevated energy prices persist, the International Monetary Fund (IMF) has warned, BBC reports.

In its World Economic Outlook report, the IMF said that in a worst-case scenario—where oil, gas and food prices spike and remain high this year and next—global growth could fall below 2% in 2026. “This would mean a close call for a global recession which has happened only four times since 1980,” it said, with the most recent instance during the Covid pandemic.

US Treasury Secretary Scott Bessent told the BBC that “a small bit of economic pain” is a price worth paying to eliminate the risk of Iran striking Western capitals with nuclear weapons.

The IMF said: “Once again, the global economy is threatened with being thrown off course - this time by the outbreak of war in the Middle East at the end of February 2026.” It added that oil prices reaching an average $110 per barrel this year and $125 in 2027 could drive inflation as high as 6% next year, potentially forcing central banks to raise interest rates.

IMF chief economist Pierre-Olivier Gourinchas told the BBC a prolonged conflict would “lead to spiralling inflation, push up unemployment and lead to food insecurity in some countries.” He warned that even if the conflict ended today, the impact would resemble the 1970s oil crisis, though less severe due to reduced global dependence on fossil fuels.

Oil prices, which peaked near $120 during the conflict, stood at $98.85 on April 14.

The IMF forecast global growth of 3.1% in 2026 if supply conditions normalise, slightly below earlier estimates. It expects the UK to be among the hardest-hit advanced economies, cutting its 2026 growth forecast to 0.8%. Iran’s economy is projected to contract by 6.1% this year, while Qatar and Iraq face sharp volatility.

Bessent added: “I wonder what the hit to global GDP would be if a nuclear weapon hit London…I am saying that I am less concerned about short term forecasts, for long term security.”

The IMF also noted Russia could benefit from higher oil prices, with projected growth of 1.1% this year and next, while warning that prolonged instability could further distort global energy markets.

By Vafa Guliyeva