The International Monetary Fund warned that if the war in Iran escalates, it could further raise oil, gas, and food commodity prices, putting the global economy at risk of a recession.
The IMF published its April 2026 World Economic Outlook titled “Global Economy in the Shadow of War” on Tuesday, warning that the state of the global economy in the face of the Iran war will “crucially depend on the conflict’s duration, intensity, and scope,” which the IMF called “inherently unpredictable.”
The agency gave three scenarios for how long the war could last and the subsequent scope of its impact on global growth. The first scenario indicates only a modest slowdown in global growth from the current 3.3% to 3.1% in 2026 if the war wraps up soon. The second so-called “adverse scenario,” in which the economic impact of the war largely fades before 2027, showed a global growth reduction of 0.8% to 2.5% in 2026, with inflation increasing by 1.5%.
But the most severe of the three cases presented by the IMF pointed toward a recession risk. In the “severe scenario,” in which a long-term Iran war has a “severe and persistent” effect on the global economy, the IMF warned that global inflation would increase by 1.9% in 2026 to 5.8%, then further to 6.1% in 2027.
“Global growth would be reduced by 1.3 percentage points in 2026. This would mean a close call for a global recession (growth rate below 2 percent), which has happened only four times since 1980, with the latest two occasions corresponding to the global financial crisis and the COVID-19 pandemic,” the IMF report says regarding the severe scenario.
In the two cases in which the Iran war persists longer, the IMF warned that the economic impact on emerging markets would be more significant than the impact on advanced economies.
“This reflects a combination of a larger exposure to higher commodity prices and disruption to energy production, a larger increase in inflation expectations, and a more pronounced tightening in financial conditions,” the IMF report says.
The two scenarios of a prolonged conflict push oil prices to between $100 to $110 per barrel in 2026. In the “adverse scenario,” the IMF predicts oil prices would fall back down to about $75 per barrel in 2027, but in the “severe scenario,” that number rises to $125 per barrel in 2027.
The price of crude oil and its volatility since the start of the U.S.-Israeli war with Iran has been a major indicator for world leaders as they track how the conflict and the uncertainty surrounding the Strait of Hormuz affect global markets.
On Tuesday morning, West Texas Intermediate Crude Oil futures for May 2026 traded at about $94 per barrel. As part of the ceasefire agreement reached last week between the United States and Iran, the Revolutionary Guard promised to reopen the Strait of Hormuz, with the U.S. moving to blockade the oil-shipping waterway to ensure the passage of ships.
“34 Ships went through the Strait of Hormuz yesterday, which is by far the highest number since this foolish closure began,” Trump announced on Truth Social on Monday.
SCOTT BESSENT COOLS ON INTEREST RATE CUT DURING IRAN WAR: ‘WAIT AND SEE’
If the conflict ends in the near future, the IMF expects world output to grow by 2.6% in 2026 and 2027.
Though this weekend’s peace talks in Islamabad, Pakistan, were unsuccessful in reaching a deal, multiple reports have suggested that negotiations could resume before the end of the two-week ceasefire.
