The global economy faces a heightened risk of recession if the ongoing conflict involving Iran persists and keeps energy prices elevated, the International Monetary Fund (IMF) said in its latest World Economic Outlook report.
The IMF warned that under a worst-case scenario, where oil, gas, and food prices surge and remain high through 2026 and 2027, global economic growth could fall below 2 percent by 2026. Such a slowdown would mark a near recession, a situation that has occurred only four times since 1980, most recently during the Covid-19 pandemic.
“Once again, the global economy is threatened with being thrown off course,” the IMF said, citing the escalation of conflict in the Middle East earlier this year.
Energy prices have risen sharply since the conflict disrupted key supply routes, including the Strait of Hormuz, a critical shipping lane for global oil. Although crude prices briefly approached $120 per barrel, they have since eased to around $98.85 as of Tuesday.
The IMF said that in severe conditions, oil prices could average $110 per barrel this year and climb to $125 by 2027. Inflation could rise to as much as 6 percent next year, potentially prompting central banks worldwide to increase interest rates to contain price pressures.
However, the IMF noted that if the conflict is resolved in the coming weeks and energy production stabilizes by midyear, global growth could reach 3.1 percent in 2026, slightly below its earlier projection of 3.3 percent. Growth for 2027 is expected to remain at 3.2 percent.
The economic impact is expected to be uneven across regions. Oil-exporting countries in the Middle East could experience sharp slowdowns or contractions. Iran’s economy is projected to shrink by 6.1 percent this year, with a possible rebound of 3.2 percent in 2027 if the conflict ends soon.
Qatar, a major exporter of liquefied natural gas, has also been affected. Its Ras Laffan facility, the largest LNG refinery in the world, was hit during the conflict and may take time to fully recover. The IMF forecasts Qatar’s economy could contract by 8.6 percent in 2026 before rebounding the following year.
Saudi Arabia is expected to see slower growth but maintain expansion, supported by alternative export routes such as the East-West pipeline. The IMF projects Saudi growth at 3.1 percent in 2026 and 4.5 percent in 2027.
In Asia, economies heavily dependent on energy imports, including the Philippines, could face increased inflationary pressure and slower growth if high fuel and food prices persist. Rising global interest rates may also affect investment flows and currency stability across the region.
The IMF emphasized that the global outlook will largely depend on how long the conflict continues and the extent of damage to energy infrastructure. It added that its current projections assume a gradual normalization of energy production and transport, but warned that forecasts may need to be revised if the situation worsens.
Si Venus L Peñaflor ay naging editor-in-chief ng Newsworld, isang lokal na pahayagan ng Laguna. Publisher din siya ng Daystar Gazette at Tutubi News Magazine. Siya ay isa ring pintor at doll face designer ng Ninay Dolls, ang unang Manikang Pilipino. Kasali siya sa DesignCrowd sa rank na #305 sa 640,000 graphic designers sa buong daigdig. Kasama din siya sa unang Local TV Broadcast sa Laguna na Beyond Manila. Aktibong kasapi siya ng San Pablo Jaycees Senate bilang isang JCI Senator.
- Venus L Peñaflor
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