SAEDNEWS: According to The Guardian, the International Monetary Fund (IMF) has warned that further escalation of the Iran war could lead to a global recession, hitting the UK hardest, slowing growth in the US and worldwide, and increasing inflation in worst-case scenarios.
According to the Saed News political desk, the International Monetary Fund (IMF) has warned that a further escalation of the war involving Iran could trigger a global recession—one that, according to the institution, would hit the United Kingdom harder than any other G7 country.
In an increasingly volatile global environment, the Washington-based IMF said the economic damage from the Middle East conflict is gradually mounting. While assessing the war’s impact so far, it has also downgraded its 2026 global growth forecast.
In its semi-annual update, the IMF stated that the UK is set to experience the sharpest growth slowdown among G7 countries this year, alongside the highest inflation rate in the group, even if the effects of rising energy prices are contained by mid-2026.
HSBC has also warned that the Iran war is undermining global confidence, as businesses continue to raise concerns over economic risks.
However, in a severe downside scenario involving a prolonged war and sustained high energy prices, the IMF said the world could face a “near-global recession probability” for only the fifth time since 1980.
The IMF warning prompted UK Chancellor Rachel Reeves to deliver unusually strong criticism, directing blame toward Donald Trump. She said: “The war in Iran is not our war, but its costs will fall on Britain. These are not costs I would have chosen, but they are costs we must respond to.”
Ahead of her trip to Washington for IMF meetings, Reeves also blamed Trump for the consequences of the war on families in Britain, the United States, and globally. She said initiating a conflict without clear objectives or an exit strategy was “foolish,” and expressed deep frustration that the US entered the war without a defined plan.
As finance ministers and central bank governors gather in Washington for the IMF and World Bank Spring Meetings, the IMF said the conflict has darkened the global growth outlook.
It warned that countries worldwide will face slower growth and higher inflation, with energy-importing economies and developing countries expected to be hit hardest.
The IMF cut its US growth forecast for 2026 by 0.1 percentage points to 2.3%, citing the impact of the conflict and mixed signals from US policy regarding Middle East objectives.
However, the steepest downgrade among G7 nations was reserved for the UK. The IMF reduced UK growth expectations for this year by 0.5 percentage points to 0.8%, while forecasting inflation could approach 4%, double the UK government’s 2% estimate.
The IMF said the UK economy is particularly vulnerable to energy price shocks and entered the conflict from a weak position after very low growth at the end of 2025.
In its World Economic Outlook, the IMF outlined three possible war scenarios. Even in a short conflict scenario, global growth would weaken and inflation would rise compared to previous forecasts.
IMF Chief Economist Pierre-Olivier Gourinchas warned that continued conflict would push the world toward a “negative scenario,” where oil prices remain near $100 per barrel this year before falling to $75 in 2027.
Under this scenario, global growth would slow to 2.5%, while inflation would rise to 5.4%.
He added: “Every passing day, and every additional disruption in energy markets, moves us closer to the adverse scenario.”
Oil prices briefly rose above $100 per barrel amid volatile trading after US–Iran negotiations reportedly stalled and a US naval blockade of the Strait of Hormuz began. Brent crude later fell around 4% to approximately $95 per barrel following hopes of renewed peace talks.
The IMF also described a more severe scenario involving prolonged, intensified war keeping oil prices above $110 through 2027. In that case, global growth could fall to around 2%, a level widely associated with global recession conditions. The IMF noted that growth has fallen below this threshold only four times since 1980, most recently during the 2020 COVID-19 pandemic and the 2008 financial crisis.
For households, inflation could exceed 6%, forcing central banks worldwide to raise interest rates to prevent temporary shocks from becoming persistent price increases.
The IMF concluded that the best way to limit economic damage is to end the conflict, and urged central banks to remain vigilant. It also advised governments considering emergency fiscal support to focus on temporary and targeted measures, warning that broad interventions such as price caps and subsidies are often costly and poorly designed.
