IMF warns Iran war disruptions are pushing global economy towards ‘adverse’ scenario; growth risks rise

The International Monetary Fund (IMF) on Thursday warned that continued disruptions from the Iran war are pushing the global economy closer to an “adverse” scenario marked by slower growth, tighter financial conditions and rising inflation risks, AFP reported.Last month, the IMF’s World Economic Outlook projected global growth at 3.1 per cent for 2026 under its baseline or “reference” scenario, while cautioning that a prolonged conflict could significantly weaken the outlook.Under the Fund’s “adverse” scenario --where oil prices remain elevated for a longer period, inflation expectations become unstable and financial conditions tighten --global growth could slow to 2.5 per cent.“We are moving into the adverse scenario, but inflation expectations are still reasonably well anchored, and financial conditions still remain accommodative,” IMF chief spokesperson Julie Kozack told reporters in Washington.The IMF has also outlined a more severe scenario under which global growth could slow to 2 per cent while inflation rises to 6 per cent.The multilateral lender is expected to release an updated World Economic Outlook in July.The ongoing US-Israel war on Iran has disrupted the Middle East and sharply escalated tensions across the region, with retaliatory actions by Tehran targeting US regional allies and severely affecting movement through the Strait of Hormuz.The strategic waterway typically handles nearly one-fifth of global oil and gas supplies, and the disruption has triggered a sharp rise in global energy prices.Kozack said the IMF was engaged in “active discussions” with several member countries facing economic pressures from the conflict.“Many countries are actually asking us for support in the policy area,” she said.During the IMF’s spring meetings last month, Managing Director Kristalina Georgieva had indicated that as many as 12 countries may require IMF financial assistance, with total support needs estimated between $20 billion and $50 billion.Kozack said discussions on financial support were continuing but declined to identify the countries involved.The IMF also flagged rising concerns around global food security as fertiliser supplies have been disrupted due to the blockade-linked disruptions in the region.“We know from history that when fertilizer prices increase, that it takes about six months or so for this to translate into increased food prices and, in some cases, reductions in yields and food security issues,” Kozack said.