IMF says global economy has shifted to ‘adverse scenario’ amid Iran war fallout

The International Monetary Fund said Thursday that the global economy has shifted toward a more pessimistic growth path as a result of the Iran war, even as energy prices begin to retreat following the mid-June U.S.-Iran ceasefire deal.

IMF spokesperson Julie Kozack told reporters that while energy and commodity prices have declined since the agreement to halt hostilities and reopen the Strait of Hormuz, "it will take time for prices and Gulf trade flows to normalize."devdiscourse+1

From Base Case to Adverse Scenario

As the Strait of Hormuz remained closed through May, keeping benchmark oil prices above $100 per barrel, Kozack said the global economy had moved from the Fund's more benign "reference forecast" — which had assumed a quick end to the conflict — toward an "adverse scenario" projecting just 2.5% global growth for 2026. That figure represents a steep decline from the 3.3% growth the IMF had projected in January before the war began on February 28.imf+1

The IMF's April World Economic Outlook had already cut its 2026 forecast to 3.1%, assuming a conflict "limited in duration and scope." The prolonged closure of the Strait through May appears to have invalidated even that downgraded assumption.imf

Developing Nations Bear the Brunt

The Fund's sharpest concerns are directed at developing countries, particularly in Africa, that are net energy importers with limited fiscal reserves. In early June, the IMF announced expanded financial support for Ethiopia, The Gambia, Burkina Faso, and Malawi to help them weather balance-of-payments pressures from elevated fuel and fertilizer costs. Kozack estimated that vulnerable economies would require between $20 billion and $50 billion in financial assistance due to the war's economic fallout.france24+1

The Economist London Stock Exchange reported that Egypt, Ethiopia, Kenya, Mozambique, and Rwanda are among the African nations most exposed to the conflict's effects.economist

Ceasefire Brings Cautious Optimism

The U.S.-Iran ceasefire agreement, announced June 15 and formally signed June 19 in Switzerland, included provisions to reopen the Strait of Hormuz and extend the ceasefire for 60 days. Oil prices fell following the announcement, though they remain roughly 10% above pre-war levels, according to the IMF.aa+2

Kozack warned that consequences would be "far more severe" if the West Asia conflict extends into 2027. The Fund is expected to release an updated World Economic Outlook on July 8 with revised growth projections reflecting the ceasefire and its aftermath.finance.yahoo+1