Washington. The International Monetary Fund (IMF) on Wednesday slightly downgraded its global economic growth forecast for 2026, citing the energy shock triggered by the Iran war. However, the impact is expected to be partially offset by robust investment in artificial intelligence and other advanced technologies.

The IMF now projects the global economy to grow 3% in 2026, down from 3.5% in 2025 and below the 3.1% growth forecast it issued in April. The fund expects global growth to rebound to 3.4% in 2027.

The downgrade follows Iran's decision to shut down the Strait of Hormuz after US and Israeli strikes on Feb. 28. The waterway handles roughly one-fifth of the world's crude oil and natural gas shipments, and its closure sent energy prices sharply higher, increasing costs for businesses and consumers.

The IMF now expects oil prices to rise nearly 32% this year, while global consumer inflation is projected to accelerate to 4.7% in 2026, up from 4.1% in 2025, suggesting that progress in bringing inflation under control has stalled.

The fund's forecasts assume the Strait of Hormuz reopens later this month, despite renewed US strikes on Iran and President Donald Trump's declaration on Wednesday that the ceasefire with Iran had ended. The IMF also assumes commercial shipping through the strait will return to normal by next March.

"The world economy has weathered the shock from the war better than feared," said Petya Koeva Brooks, deputy director of the IMF's Research Department. She attributed the limited economic damage to countries drawing on existing oil stockpiles and increased production from oil-exporting nations outside the Persian Gulf.

Countries that produce and export their own energy, while also benefiting from strong AI-related investment, have been more resilient to the conflict's economic fallout. Among them is the United States, where the IMF expects the economy to expand 2.3% in 2026, up from 2.1% in 2025 and unchanged from its April forecast. The fund also cited President Donald Trump's 2025 tax cuts, strong productivity gains, and a buoyant stock market as factors supporting US growth.

By contrast, the 20-member euro area, which has been hit harder by rising energy costs, is forecast to grow just 0.9% in 2026, down from 1.4% in 2025.

China, the world's second-largest economy, is expected to grow 4.6% in 2026, down from 5% in 2025 but slightly above the IMF's April forecast. While higher energy prices and a prolonged property downturn continue to weigh on growth, government infrastructure spending, rapid expansion in high-tech manufacturing, and strong exports are providing support.

India is again projected to be the world's fastest-growing major economy, with growth of 6.4% in 2026, easing from 7.7% a year earlier but remaining underpinned by strong consumer spending.

The IMF is a 191-member international financial institution that promotes global economic growth, financial stability, and poverty reduction.

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