The IMF cut its 2026 global growth projection, warning that the world economy could be “thrown off course” by war in the Middle East as the conflict roils commodity markets and sparks higher prices.

The global economy is set to grow by 3.1 percent this year, said the International Monetary Fund in its World Economic Outlook report, released during its spring meetings in Washington.

This is down from 3.3 percent forecast in January before hostilities erupted February 28 with US-Israeli strikes against Iran that prompted Tehran’s retaliation and sparked a broader conflict in the region.

Prices of oil, gas and fertilizers have surged, as Iran virtually blocked traffic through the Strait of Hormuz, a key shipping waterway. US President Donald Trump has also ordered a naval blockade around Iran’s ports.

The IMF expects higher inflation this year at 4.4 percent, 0.6 percentage points above its January forecast.

Compared to the oil shocks of the 1970s, “the global economy is much less oil dependent now than it was back then,” Gourinchas said at a press conference.

After this the “disinflation path” of recent years should reassert itself, Gourinchas said.

But these projections assume a relatively short-lived conflict with temporary energy market disruptions.

In more adverse scenarios where energy prices remain steep, global growth could slow to 2.5 percent or even around 2.0 percent.

The IMF said this latest shock comes less than a year since the shift in US trade policies, and the transition to a new international trade system is still ongoing.

A year ago, Trump unleashed sweeping tariffs on US trading partners, rocking financial markets and snarling supply chains.

Some of the tariffs have been struck down by the Supreme Court, but uncertainty lingers as Trump moves to reimpose duties via other means.