IMF warns global risk
The IMF said the conflict involving Iran has "halted" previously solid global economic momentum and trimmed its growth outlook. (axios.com) The fund warned that persistently high oil, gas and food prices could push the world toward recession if the war continues and it sharply lowered forecasts for the Middle East. (za.investing.com) Markets reacted by pricing in higher inflation—traders boosted bets on further rate rises—and even strong bank earnings couldn't calm sentiment, with Goldman Sachs shares down about 5% despite higher profits. ( )
The International Monetary Fund said on Tuesday that war in the Middle East has stopped the world economy’s earlier momentum and lowered its 2026 growth forecast to 3.1%. (imf.org) The fund had expected 3.4% growth before the conflict, IMF chief economist Pierre-Olivier Gourinchas said, but now sees headline inflation rising to 4.4% in 2026 under its baseline scenario. (imf.org) That baseline assumes the conflict is limited and energy commodity prices rise 19% this year. In a worse case, the IMF said global growth drops to 2.5%; in its severe case, growth slows to 2.0% in both 2026 and 2027 while inflation climbs above 6%. (imf.org) The mechanism is simple: higher oil, gas and food prices act like a tax on households and businesses. The IMF said that shock raises transport and factory costs, squeezes purchasing power and can push workers and firms to demand higher wages and prices in return. (imf.org) The fund tied the biggest immediate danger to the Strait of Hormuz, a shipping lane for a large share of global oil and gas flows. It said any longer closure or more damage to drilling and refining sites could turn today’s price spike into a broader energy crisis. (imf.org) The regional hit is sharper in the Middle East and North Africa, where the IMF cut forecasts as Gulf exporters absorb the effects of war and disrupted energy trade. Reuters reported the downgrade on Tuesday as finance officials gathered for the International Monetary Fund and World Bank spring meetings in Washington. (usnews.com) Markets are reacting as if inflation will stay hotter for longer. Reuters reported Tuesday that bond investors were pushing “curve steepener” trades, with longer-dated United States Treasury yields under pressure as traders priced in stickier inflation and heavier debt issuance. (usnews.com) That gloom is spilling into stocks, including bank earnings. Goldman Sachs reported first-quarter earnings per share of $17.55, above the $16.49 analysts expected, but its shares opened about 4% lower on Monday as investors focused on weaker fixed-income trading and wider recession fears tied to the war. (usnews.com) The IMF’s warning is not that recession has arrived. It is that if oil stays above $100 a barrel through 2027 and the conflict worsens, the world economy moves close to that line after entering 2026 with stronger growth than economists expected just a few months ago. (usnews.com)
