The global economy is facing fresh uncertainty as the International Monetary Fund (IMF) on Tuesday lowered its growth outlook, citing rising energy prices triggered by the ongoing West Asia conflict and continued disruptions in the Strait of Hormuz.

With finance leaders gathering in Washington for the IMF-World Bank Spring Meetings, the institution outlined three possible global growth paths — weaker, worse, and severe — depending on how the conflict unfolds.

The International Monetary Fund (IMF) has lowered its global growth outlook, warning that rising energy prices due to the ongoing West Asia conflict and disruptions in the Strait of Hormuz are pushing the world economy toward a more uncertain and potentially weaker trajectory.

Presenting its latest World Economic Outlook during the Spring Meetings in Washington, the IMF outlined three possible scenarios depending on how the conflict unfolds — a baseline, an adverse case, and a severe downturn. The baseline assumes a short-lived conflict, with oil prices easing in the second half of 2026 and averaging around $82 per barrel.

However, IMF Chief Economist Pierre-Olivier Gourinchas cautioned that current developments suggest the global economy may already be moving closer to the adverse scenario. This scenario envisions a prolonged conflict, keeping oil prices near $100 per barrel and dragging global growth down to 2.5%, compared to 3.4% in 2025.

In the worst-case or “severe” scenario, oil prices could surge to $110 per barrel in 2026 and $125 in 2027, significantly tightening financial conditions and pushing global growth down to 2.0%. The IMF warned that such levels would bring the world economy close to recession territory, similar to downturns seen during the 2008 Global Financial Crisis and the COVID-19.

The report also flagged renewed inflation risks, noting that sustained high energy prices could push global inflation above 6% in 2026. This may force central banks to adopt tighter monetary policies, potentially slowing economic activity further.

Among major economies, the United States is expected to see modest growth of 2.3%, supported by tax cuts and continued investment in technology. The euro zone is projected to face a sharper slowdown, with growth at 1.1%, as it remains vulnerable to energy shocks linked to the Russia-Ukraine War. China’s growth is forecast at 4.4% in 2026, while Japan’s remains subdued at 0.7%.

Emerging markets are likely to bear the brunt of the slowdown, with growth projected to decline to 3.9% in 2026. The West Asia and Central Asia region is expected to see a significant drop in growth to 1.9%, reflecting the direct impact of the conflict.

In contrast, India stands out as a relatively strong performer, with growth projected at 6.5% for both 2026 and 2027, supported by domestic momentum and improving trade conditions.

The IMF also cautioned governments against broad fiscal measures such as fuel subsidies and tax cuts to counter rising energy costs, warning that such steps could strain public finances and distort markets. Instead, it recommended targeted and temporary support for vulnerable populations.

Overall, the IMF warned that continued geopolitical tensions and energy disruptions could further weaken global growth, with the risk of a deeper slowdown increasing the longer the conflict persists.