IMF downgrades global growth forecast

The International Monetary Fund (IMF) on Wednesday modestly downgraded its outlook for the world economy in 2026, citing the energy shock caused by the Iran war. The IMF now expects global growth of 3% in 2026, down from 3.5% in 2025 and from the 3.1% forecast in April. The downgrade is driven by Iran's shutdown of the Strait of Hormuz on February 28 in response to U.S. and Israeli attacks, which disrupted oil and gas flows and caused energy prices to soar. The IMF expects oil prices to rise nearly 32% in 2026 and global consumer prices to increase 4.7%, stalling progress against inflation. However, the economic damage has been partially offset by booming investment in artificial intelligence and other technologies, as well as increased production by oil-exporting countries outside the Persian Gulf. The IMF forecasts assume the Strait of Hormuz reopens later in July and commerce normalizes by March 2027. The United States is expected to grow 2.3% in 2026, supported by energy production, AI investment, tax cuts, and productivity gains. The Eurozone is forecast to grow only 0.9%, hit hard by higher energy prices. China is expected to grow 4.6%, and India 6.4%, the fastest among major economies.