Several Middle Eastern economies are expected to contract in 2026 in the wake of the war in Iran, which broke out in late February, according to the International Monetary Fund’s latest World Economic Outlook, reports Statista.

The IMF has revised its global growth forecast down to 3.1 percent. However, this headline figure masks regional differences, with the Middle East and Central Asia now projected to slow to 1.9 percent in 2026, marking a drop of 3 percentage points from the January outlook.

The IMF warns that commodity exporters directly affected by the conflict face steep downgrades due to reduced production and exports. The extent of the impact will depend on the degree of the damage to energy and transport infrastructure, as well as reliance on the Strait of Hormuz and access to alternative export routes. As a result, contractions are expected to be most severe in Iran, Iraq and Qatar. Growth across the region is expected to rebound in 2027, assuming that energy production and transport routes normalize in the coming months.

As the following chart shows, Iran’s 2026 growth forecast has been cut by 7.2 percentage points since January to -6.1 percent. In Saudi Arabia, the outlook has been lowered by 1.4 percentage points to 3.1 percent.

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IMF slashes global growth forecast due to war

The International Monetary Fund has downgraded its global growth forecast for 2026 to 3.1 percent in its latest World Economic Outlook, released Tuesday, citing the outbreak of the war in the Middle East. This marks a 0.2 percentage point cut from its previous estimate of 3.3 percent.

The IMF said the revised outlook is based on the scenario that the conflict in Iran remains limited in “duration, intensity and scope”, with disruptions easing by mid-2026. Global growth is then expected to edge up to 3.2 percent in 2027. This is still below the recent pace of around 3.4 percent in 2024-25 and the 2000-19 average of 3.7 percent.

Under a more severe scenario, involving sharper and more prolonged increases in energy prices, global growth could slow to 2.5 percent in 2026. Further damage to energy infrastructure in the region could push that figure to as low as 2 percent.

Several major economies have seen their outlooks downgraded. The United Kingdom recorded the largest cut among G7 economies, with its forecast reduced by 0.5 percentage points to 0.8 percent growth this year. The IMF attributed this to “the war and a slower pace of monetary easing”, adding that growth is expected to recover to 1.3 percent in 2027, though still weaker than previously anticipated due to lingering energy price pressures.

Elsewhere, forecasts for Germany, France, the United States and China were also revised down. Germany’s outlook was cut by 0.3 percentage points to 0.8 percent, while others saw more modest reductions of 0.1 percentage point.

In contrast, India and Russia saw upward revisions of 0.1 and 0.3 percentage points, respectively. India’s upgrade reflects strong momentum from 2025 and a reduction in additional U.S. tariffs on its exports from 50 to 10 percent, which outweigh the impact of the Middle East conflict. Russia’s outlook, meanwhile, is supported by higher commodity prices, which are expected to boost growth in 2026, compared with the IMF’s January update.

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