IMF cuts outlook, warns of potential global recession

The International Monetary Fund has cut its growth outlook due to Iran war-driven energy price spikes and supply disruptions and warned that the global economy would teeter on ‌the brink of recession if the conflict worsens and oil stays above $US100 per barrel throughout 2027.

IMF's 3 possible scenarios for global economy

With massive uncertainty over the Middle East conflict gripping finance officials gathering for IMF and World Bank meetings in Washington DC, the IMF presented three growth scenarios: weaker, worse and severe - depending on how the ‌war unfolds.

The World Economic Outlook's most optimistic "reference scenario" assumes a short-lived Iran war and forecasts 3.1 per cent real GDP growth for 2026, down 0.2 percentage point from its previous forecast in January.

Under this scenario, oil prices average $US82 per barrel for all of 2026, a decline from recent levels of about $US100 for the Brent benchmark futures ‌price.

Without the Middle East conflict, the IMF said it would have upgraded its growth outlook by 0.1 percentage point to 3.4 per cent, due to a continued technology investment boom, lower interest rates, less-severe US tariffs and fiscal support in some countries.

But the war has created a far bigger risk to the global economy than US President Donald Trump's initial wave of steep tariffs did a year ago, IMF chief economist Pierre-Olivier Gourinchas told Reuters in an interview.

"What's happening in the Gulf is potentially much, much larger, and that's what our scenarios are kind of documenting," he said.