The International Monetary Fund (IMF) has signaled a downward revision in its global growth forecast for 2026, citing the ongoing aftermath of the recent conflict in the Middle East. IMF Managing Director Kristalina Georgieva outlined these concerns in a speech delivered on Thursday ahead of the fund’s biannual meetings next week.

Initially, the IMF had projected global economic expansion of 3.3% for the year, with expectations for an upgrade driven by surging investment in artificial intelligence and the easing of interest rates. However, the outbreak of hostilities, particularly affecting the Strait of Hormuz—a crucial corridor for global oil shipments—has altered the outlook significantly. Georgieva said new assessments would lower growth forecasts due to a combination of infrastructure damage, disrupted supply chains, reduced business and consumer confidence, and other lingering economic effects.

While oil- and gas-exporting countries uninvolved in the conflict are expected to experience less impact, the broader global economy faces heightened risks from elevated energy prices and inflationary pressures. The closure of the Strait of Hormuz earlier this year pushed crude oil prices above $100 per barrel, exacerbating inflation concerns. Although energy prices have moderated recently, the situation remains volatile, with Tehran’s intention to impose fees on shipping through the strait potentially prolonging uncertainty.

Georgieva urged governments to avoid unilateral measures such as export or price controls that could aggravate global economic instability. She also advised central banks to maintain current interest rates temporarily in order to better monitor inflation dynamics rather than rushing to tighten monetary policy. Nonetheless, she acknowledged that if inflation expectations become unanchored, prompting a wage-price spiral, central banks would need to respond with rate hikes, actions that would likely dampen growth further.

The speech reflected complex geopolitical and economic challenges as the U.S. and Iran appear to have reached a tentative cease-fire agreement contingent on reopening the Strait of Hormuz. Still, the situation underscores how control over critical infrastructure like shipping lanes, technology, and corporate assets can become instruments of economic leverage in global conflicts.

With the IMF’s updated global economic outlook scheduled for release next week, markets and policymakers will be closely watching for further guidance on navigating the risks posed by ongoing geopolitical tensions and their economic repercussions.