IMF Chief Warns that Even with a Peace Accord, the Iran Crisis could Have Lasting Effects for the Global Economy

Kristalina Georgieva, head of the International Monetary Fund, has warned that the continuing war in Iran will have enduring detrimental impacts on the global economy, even in the best-case scenario of a lasting peace agreement in the Middle East.

In a speech amid the fragile ceasefire, Kristalina Georgieva highlighted the “scarring effects” of the ongoing conflict, predicting slower global growth for the year compared to earlier forecasts.

She noted that the IMF would have upgraded its 2026 growth outlook if not for the war's outbreak six weeks prior, but now even the optimistic scenarios suggest a downgrade, with no simple return to the previous state.

IMF Flags Iran's War Global Risks

Six weeks into the conflict, the conditional ceasefire announced recently is at risk due to disagreements between Washington and Tehran. The global oil price increased amid volatile market conditions, highlighting concerns about potential disruptions to energy supplies through the Strait of Hormuz, crucial for the world economy.

In a preparatory speech for the IMF’s spring meetings, Georgieva underlined increased uncertainty regarding the severity of the global economic slowdown due to the war. She indicated that all scenarios from the upcoming World Economic Outlook report suggest a lasting decline in living standards.

In autumn, the IMF projected a global growth of 3.1% for 2026, down from 3.2% in 2025, influenced by an AI-driven investment boom that offered “unexpected resilience” during Donald Trump's tariff wars. Georgieva indicated that the world economy was entering the Iran war with strong momentum, supported by technology investments and favourable financial markets.



The Conflict's Ongoing Economic Strain

Infrastructure damage and supply disruptions due to the war will negatively impact the global economy, irrespective of the possibility of reaching a peace deal.

Notably, highlighting uncertainty in shipping and production restoration in the Gulf, the IMF managing director stated that global disruptions are expected to continue.

She noted the unpredictability of traffic through the Strait of Hormuz and regional air recovery, indicating that growth will be slower, even with potential peace.

Moreover, Georgieva indicated that net oil-importing nations, poorer countries, and small-island nations would face more severe growth downgrades. She called on governments to avoid unilateral measures like export and price controls, warning that such actions could worsen global conditions.

IMF chief advises governments to implement targeted and temporary support measures for vulnerable households amid elevated debt levels and higher borrowing costs.

Costly tax cuts or energy subsidies may increase inflation and jeopardise public finances, according to a statement emphasising the need for responsible use of fiscal resources. Central banks should maintain current interest rates but be prepared to take action against inflation. Rebuilding fiscal space post-crisis is urgent.

BoE Chief: Middle East War Shakes Global Economy

Governor Andrew Bailey of the Bank of England indicated that the global economy is experiencing a significant shock due to the war.

Bailey, chair of the Financial Stability Board, informed the EU parliament's committee on economic and monetary affairs that ongoing risks are tied to the volatile situation in the Middle East.

Further, he noted that recent conflicts have increased market volatility, stressing the need for vigilance as conditions can change drastically overnight, as illustrated by the previous day's market fluctuations.

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