The International Monetary Fund said Wednesday it now expects the global economy to expand by a sluggish 3% in 2026, down from 3.5% last year and from the 3.1% it had forecast for this year in April. The numbers land where they always do: on ordinary people, on prices, on wages, on the cost of keeping the lights on while the powerful keep rearranging the world from above.
Who Pays for the Shock
The fund said the outlook has been weakened by the energy shock caused by the Iran war, even as booming investment in artificial intelligence and other technologies is helping offset some of the damage. That’s the split screen of the system in one sentence. War drives up energy costs, and the people who buy food, fuel, and everything made with fuel get squeezed. Meanwhile, the money flowing into AI and other technologies cushions the blow for the sectors already positioned to profit.
The IMF expects worldwide growth to rebound to 3.4% next year. It said oil prices are now expected to be up nearly 32% this year and global consumer prices overall to increase 4.7% in 2026, up from 4.1% in 2025. The fund said that means two years of progress against inflation has stalled. For everyone below the boardroom level, that means the same old arithmetic: more money out, less stability in.
Iran responded to U.S. and Israeli attacks Feb. 28 by shutting down the Strait of Hormuz, through which a fifth of the world’s crude oil and natural gas passes. Energy prices soared, squeezing businesses and consumers. The IMF’s forecasts assume the Strait of Hormuz reopens later this month, even though U.S. strikes on Iran resumed and President Donald Trump declared Wednesday that a ceasefire with Iran was over. The forecasts also assume commerce through the strait returns to normal by next March. The whole arrangement depends on a chokepoint controlled by states and threatened by states, while everyone else is left to absorb the fallout.
What the IMF Calls Stability
Petya Koeva Brooks, deputy director of the IMF’s research department, said, “The world economy has weathered the shock from the war better than feared.” She said the economic damage from the energy shock has been limited partly because countries could draw on existing oil stockpiles and because oil-exporting countries outside the Persian Gulf stepped up production. That’s the rescue plan: stored fuel, extra extraction, and a global economy built to keep moving no matter who gets burned by it.
Countries that produce and export their own energy and that benefit from AI investment are insulated from the war’s economic damage, the IMF said. Among them is the United States, which the fund expects to grow 2.3% this year, up from 2.1% in 2025 and unchanged from the April forecast. President Donald Trump’s 2025 tax cuts, big gains in productivity and a strong stock market are also giving the American economy a lift. The gains don’t float evenly. They rise where capital already sits.
The 21 European countries that share the euro currency are forecast to grow just 0.9% this year, down from 1.4% in 2025, after being hit hard by higher energy prices. China, the world’s No. 2 economy, is expected to expand 4.6% this year, down from 5% in 2026 but a bit faster than the IMF had expected in April. The IMF said China is being weighed down by higher energy prices and a property market collapse, but offsetting help is coming from public works spending, a surge in high-tech manufacturing and booming exports. Different machinery, same hierarchy.
The Bottom Line for Everyone Else
India is once again forecast to be the world’s fastest-growing major economy, advancing at a 6.4% clip, down from a sizzling 7.7% last year, on strong consumer spending. The IMF said it is a 191-nation lending organization that works to promote economic growth and financial stability and to reduce global poverty. That’s the official mission. The lived reality in this report is a world where war, energy control, tax cuts, stock gains, and industrial bets on AI decide who gets relief and who gets squeezed.