The International Monetary Fund has slashed its 2026 global economic growth forecast to 3%, down from 3.5% in 2025, as the escalating Iran war undermines gains from the AI boom. This marks a significant slowdown in the world economy, driven by energy market disruption.
According to the IMF, oil prices are expected to average roughly 32% higher this year compared to last. Global consumer prices are projected to jump 4.7%, halting two years of cooling inflation and squeezing households and businesses alike.
The conflict has upended supply dynamics in key energy corridors, raising production costs and straining inventory levels. The IMF warns that sustained price pressures could curtail industrial activity and dampen trade flows across affected regions.
Investment in energy infrastructure remains in flux as firms reassess capital expenditure amid heightened geopolitical risk. The forecast underscores the fragility of global supply chains already tested by sanctions and trade route disruptions linked to the war.
Yet the IMF identifies the ongoing AI investment boom as one of the few bright spots. Productivity gains from artificial intelligence are expected to partially offset the economic damage, though their full impact remains uncertain given the scale of the crisis.