Energy shock ripples unevenly across regions
The International Monetary Fund has downgraded its global economic growth forecast to 3.1% for 2026, warning that the Middle East conflict stemming from the war involving Iran has “abruptly darkened” the global financial outlook.
The revised figure, released Tuesday, marks a decline from the 3.3% the IMF projected in January and from the 3.4% expansion recorded in 2025. The fund also raised its global inflation forecast to 4.4% this year, up from 4.1% in 2025 and from the 3.8% it had projected in January.
IMF economic counsellor Pierre-Olivier Gourinchas, writing in the report, attributed the deterioration to a conflict that has “interrupted what had been a steady growth trajectory.” He warned that the war’s economic toll remains uncertain.
“The duration and scale of the conflict and the time it will take for energy production and transit to normalize after the end of hostilities will determine the ultimate size of the shock to the global economy,” Gourinchas said.
US and Israeli strikes on Iran – coupled with Tehran’s closure of the Strait of Hormuz and retaliatory attacks on energy infrastructure in neighbouring countries – have sent oil and gas prices climbing worldwide, Global News reported. A fragile two-week ceasefire remains in place, though no peace agreement has been reached.
While a modest downgrade of 0.1 percentage points was applied to the United States, which the IMF projects will grow by 2.3% in 2026, the fund was more severe in its outlook for emerging markets and developing economies, cutting their forecast to 3.9% from 4.2% in January. Higher food and energy prices were cited as the primary drivers, disproportionately affecting countries across Asia, Latin America, and Africa.
Canada fared comparatively well in the report, with the IMF projecting 1.5% growth for 2026 – only 0.1 percentage points below its January forecast and still the second-highest among G7 nations. That figure nonetheless trails both Deloitte Canada’s revised estimate of 1.2% and last year’s 1.7% gain.
Prime minister Mark Carney acknowledged the “enormous shock” the conflict has created but said Canada’s economic performance validated his government’s strategy.
“If there is a unifying theme in our economic strategy, it’s strength and independence,” Carney told reporters Tuesday.
Russia, meanwhile, emerged as an unexpected beneficiary of the energy disruption. The IMF upgraded its forecast for the Russian economy to 1.1% from 0.8% in January, citing gains from elevated oil prices.
Gourinchas cautioned at a news conference Tuesday that current conditions place the global economy “somewhere in between the reference scenario and the adverse scenario” of 2.5% growth.
“Every day that passes and every day that we have more disruption in energy, we are drifting closer towards the adverse scenario,” he said.
