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'A Very Dark Picture': IMF Warns Trump's Iran War Could Unleash Global Recession
One expert called the new IMF forecast "extremely concerning for the global economy," noting that "the most dire impacts of our economic situation will be felt by the poor and the vulnerable."
Apr 14, 2026
The International Monetary Fund warned Tuesday that the US-Israeli war on Iran could slow global economic growth, stoke inflation, and increase the possibility of a worldwide recession and energy crisis.
The illegal war of choice on Iran being waged by US President Donald Trump and the government of fugitive Israeli Prime Minister Benjamin Netanyahu has already had wide-ranging negative impacts on the global economy, from soaring fuel prices caused by the closure of the Strait of Hormuz to supply chain disruptions and financial market volatility.
However, a major global economic crisis has thus far been averted. That could soon change.
"Despite major trade disruptions and policy uncertainty, last year ended on an upbeat note," International Monetary Fund director of research Pierre-Olivier Gourinchas wrote in an analysis of the IMF's latest World Economic Outlook report. "The private sector adapted to a changing business environment, while powerful offsets came from lower US tariffs than originally announced, some fiscal support, and favorable financial conditions coupled with strong productivity gains and a tech boom."
"Despite some downside risks, the momentum was expected to carry over into 2026, lifting the pre-conflict global growth forecast to 3.4%," Gourinchas continued. "War in the Middle East has halted this momentum. The closing of the Strait of Hormuz and serious damage to critical facilities in a region central to global hydrocarbon supply raise the prospect of a major energy crisis should hostilities continue."
The IMF said that even if the war ends quickly, lasting damage to the world's economy will still happen.
According to the IMF report:
Under the assumption of a limited conflict, global growth is projected at 3.1% in 2026 and 3.2% in 2027, below recent outcomes and well under pre-pandemic averages. Global inflation is expected to tick up in 2026 and resume its decline in 2027. Pressures are concentrated in emerging market and developing economies, especially commodity importers with preexisting vulnerabilities. Risks are decisively on the downside. A prolonged conflict, deeper geopolitical fragmentation, disappointment over [artificial intelligence]-driven productivity, or renewed trade tensions could weaken growth and unsettle markets. High public debt and eroded policy buffers add vulnerability. Policies should foster adaptability, enhance credibility, and reinforce international cooperation.
The IMF said that "the shock’s ultimate magnitude will depend on the conflict’s duration and scale—and how quickly energy production and shipment normalize once hostilities end," and that effects will vary by location.
"Countries will feel the impact differently," Gourinchas wrote. "As in past commodity-price surges, importers are highly exposed. Low-income and developing economies—especially those with vulnerabilities and limited buffers—are likely to be hit hardest. Gulf energy exporters will face economic fallout from damaged infrastructure, production disruptions, export constraints, and weaker tourism and business activity. Remittances will fall in countries that supply migrant workers to the region."
Eric LeCompte, executive director of the religious development group Jubilee USA Network and a United Nations finance expert, called the new IMF forecast "extremely concerning for the global economy," lamenting that "the most dire impacts of our economic situation will be felt by the poor and the vulnerable."
The new report comes as the IMF's annual Spring Meetings are underway in Washington, DC.
“World leaders coming to Washington are receiving a very dark picture of the global economy,” said LeCompte. “The war is causing greater poverty and increases in our fuel and food costs."
Other groups have also warned of the adverse economic effects of the US-Israeli war on Iran.
Ben May, Bridget Payne, and Paul Moroz of Oxford Economics recently published a report warning that a longer war in Iran "could tip the global economy into recession."
In such a situation, "the Gulf states suffer most acutely—GDP down over 8% in 2026—before rebounding sharply as production recovers," they wrote. "Advanced Asian economies, which are especially reliant on Gulf oil, take a heavy blow from energy import cost surges and supply chain disruption."
"Europe faces a painful squeeze on gas and electricity," the trio added. "The US fares somewhat better given its domestic energy production, but an equity market decline of nearly 20% weighs heavily on consumer spending."
Some US-based organizations have focused on the war's domestic economic impacts.
Dean Baker, a senior fellow at the Center for Economic Policy Research, published an analysis earlier this month asserting that "making enemies makes us poorer."
"Secretary of Defense (or War) Pete Hegseth seems to be having a really great time killing people in Iran, but his live action video games come at a big cost—not just in lives, but in budget dollars," Baker wrote. "To be clear, the main reason to oppose this pointless war is its impact on the people of Iran and elsewhere in the region. But it also has a huge economic cost that is seriously underappreciated."
"In addition to reducing our security and jeopardizing the well-being of people around the world, Donald Trump’s belligerence will cost us a huge amount of money," he said. Focusing on US military spending, Baker noted that "Trump wants the country to spend 5% of GDP, or $1.5 trillion a year, on the military. This comes to $12,000 per household."
Trump and his Republican Party are seeking to offset some of their record military spending with devastating cuts to social programs upon which tens of millions of Americans rely. Already reeling from the biggest cuts to Medicaid and Supplemental Nutrition Assistance Program spending in those programs' histories, Trump’s budget request for fiscal year 2027 contains $73 billion in total reductions in nondefense spending.
"It is striking to see that Congress might be willing to quickly cough up this money," said Baker, referring to military funding, "when it has refused far smaller sums that could have made a huge difference in the lives of tens of millions of people."
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The Perils and Promise of the Emerging Multipolar World
The world economy is experiencing a deep process of economic convergence, according to which regions that once lagged the West in industrialization are now making up for lost time.
Jun 06, 2024
The World Bank’s release on May 30 of its latest estimates of national output (up to the year 2022) offers an occasion to reflect on the new geopolitics. The new data underscore the shift from a U.S.-led world economy to a multipolar world economy, a reality that U.S. strategists have so far failed to recognize, accept, or admit.
The World Bank figures make clear that the economic dominance of the West is over. In 1994, the G7 countries (Canada, France, Germany, Italy, Japan, U.K., U.S.) constituted 45.3% of world output, compared with 18.9% of world output in the BRICS countries (Brazil, China, Egypt, Ethiopia, India, Iran, Russia, South Africa, United Arab Emirates). The tables have turned. The BRICS now produce 35.2% of world output, while the G7 countries produce 29.3%.
As of 2022, the largest five economies in descending order are China, the U.S., India, Russia, and Japan. China’s GDP is around 25% larger than the U.S.’ (roughly 30% of the U.S. GDP per person but with 4.2 times the population). Three of the top five countries are in the BRICS, while two are in the G7. In 1994, the largest five were the U.S., Japan, China, Germany, and India, with three in the G7 and two in the BRICS.
Despite the new global economic realities, the U.S. security state still pursues a grand strategy of “primacy,” that is, the aspiration of the U.S. to be the dominant economic, financial, technological, and military power in every region of the world.
As the shares of world output change, so too does global power. The core U.S.-led alliance, which includes the U.S., Canada, U.K., European Union, Japan, Korea, Australia, and New Zealand, was 56% of world output in 1994, but now is only 39.5%. As a result, the U.S. global influence is waning. As a recent vivid example, when the U.S.-led group introduced economic sanctions on Russia in 2022, very few countries outside the core alliance joined. As a result, Russia had little trouble shifting its trade to countries outside the U.S.-led alliance.
The world economy is experiencing a deep process of economic convergence, according to which regions that once lagged the West in industrialization in the 19th and 20th centuries are now making up for lost time. Economic convergence actually began in the 1950s as European imperial rule in Africa and Asia came to an end. It has proceeded in waves, starting first in East Asia, then roughly 20 years later India, and for the coming 20-40 years in Africa.
These and some other regions are growing much faster than the Western economies since they have more “headroom” to boost GDP by rapidly raising education levels, boosting workers’ skills, and installing modern infrastructure, including universal access to electrification and digital platforms. The emerging economies are often able to leapfrog the richer countries with state-of-the-art infrastructure (e.g., fast intercity rail, 5G, modern airports and seaports) while the richer countries remain stuck with aging infrastructure and expensive retrofits. The IMF’s World Economic Outlook projects that the emerging and developing economies will average growth of around 4% per year in the coming five years, while the high-income countries will average less than 2% per year.
It’s not only in skills and infrastructure that convergence is occurring. Many of the emerging economies, including China, Russia, Iran, and others, are advancing rapidly in technological innovations as well, in both civilian and military technologies.
China clearly has a large lead in the manufacturing of cutting-edge technologies needed for the global energy transition, including batteries, electric vehicles, 5G, photovoltaics, wind turbines, fourth generation nuclear power, and others. China’s rapid advances in space technology, biotechnology, nanotechnology, and other technologies is similarly impressive. In response, the U.S. has made the absurd claim that China has an “overcapacity” in these cutting-edge technologies, while the obvious truth is that the U.S. has a significant under-capacity in many sectors. China’s capacity for innovation and low-cost production is underpinned by enormous R&D spending and its vast and growing labor force of scientists and engineers.
Despite the new global economic realities, the U.S. security state still pursues a grand strategy of “primacy,” that is, the aspiration of the U.S. to be the dominant economic, financial, technological, and military power in every region of the world. The U.S. is still trying to maintain primacy in Europe by surrounding Russia in the Black Sea region with NATO forces, yet Russia has resisted this militarily in both Georgia and Ukraine. The U.S. is still trying to maintain primacy in Asia by surrounding China in the South China Sea, a folly that can lead the U.S. into a disastrous war over Taiwan. The U.S. is also losing its standing in the Middle East by resisting the united call of the Arab world for recognition of Palestine as the 194th United Nations member state.
Yet primacy is certainly not possible today, and was hubristic even 30 years ago when U.S. relative power was much greater. Today, the U.S. share of world output stands at 14.8%, compared with 18.5% for China, and the U.S. share of world population is a mere 4.1%, compared with 17.8% for China.
The trend toward broad global economic convergence means that U.S. hegemony will not be replaced by Chinese hegemony. Indeed, China’s share of world output is likely to peak at around 20% during the coming decade and thereafter to decline as China’s population declines. Other parts of the world, notably including India and Africa, are likely to show a large rise in their respective shares of global output, and with that, in their geopolitical weight as well.
We are therefore entering a post-hegemonic, multipolar world. It too is fraught with challenges. It could usher in a new “tragedy of great power politics,” in which several nuclear powers compete—in vain—for hegemony. It could lead to a breakdown of fragile global rules, such as open trade under the World Trade Organization. Or, it could lead to a world in which the great powers exercise mutual tolerance, restraint, and even cooperation, in accord with the U.N. Charter, because they recognize that only such statecraft will keep the world safe in the nuclear age.
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Global Cooperation Key to Preventing 'Runaway' Climate and AI Chaos: UN Chief
"Geopolitical divides are preventing us from coming together around global solutions for global challenges," said United Nations Secretary-General António Guterres.
Jan 17, 2024
At the World Economic Forum in Davos, Switzerland on Wednesday, United Nations Secretary-General António Guterres warned that multilateralism that includes often overlooked governments in the Global South is the only solution to the rapidly developing crises posed by the climate emergency and artificial intelligence—both of which are worsening "the global crisis in trust."
"In the face of the serious, even existential threats posed by runaway climate chaos," said Guterres, "and the runaway development of artificial intelligence without guardrails, we seem powerless to act together."
While "droughts, storms, fires, and floods are pummeling countries and communities," particularly in nations that have contributed the least planet-heating fossil fuel pollution, Guterres told the political and business elite assembled in Davos, "countries remain hellbent on raising emissions."
He reserved particular scorn for the United States fossil fuel industry, which—amid the Biden administration's approval of pollution-causing infrastructure including the Willow oil project and the Mountain Valley Pipeline—deceives the public with false climate solutions, misinformation, and greenwashing campaigns "to kneecap progress and keep the oil and gas flowing indefinitely."
As suffering intensifies in communities that are most vulnerable to drought, damage from extreme weather, and other climate catastrophes, Guterres said, fossil fuel giants and powerful governments are risking lives to only delay an "inevitable" shift to renewable energy.
"The phaseout of fossil fuels is essential," said the secretary-general. "No amount of spin or scare tactics will change that. Let's hope it doesn't come too late."
As trust between the Global South and wealthy governments is frayed by fossil fuel-producing countries' refusal to leave oil, gas, and coal behind, Guterres warned that the separate threat of "unintended consequences" of artificial intelligence evolution also looms—for people in rich economies as well as developing countries.
"This technology has enormous potential for sustainable development," said the U.N. chief, while noting that "some powerful tech companies are already pursuing profits with a clear disregard for human rights, personal privacy, and social impact."
Guterres' comments came days after the International Monetary Fund (IMF) released a new analysis of AI's expected impact on the global economy and workers, with nearly 40% of the labor market expected to be "exposed" to AI.
In wealthy countries, about 60% of jobs are projected to be impacted by AI, and about half of those workers are likely to see at least some of their primary tasks being completed by AI tools like ChatGPT or similar technology, "which could lower labor demand, leading to lower wages, and reduced hiring," according to the IMF. "In the most extreme cases, some of these jobs may disappear."
The analysis released Sunday noted that the rapidly changing field could worsen inequality within countries, as some higher earners may be able to "harness AI" and leverage its use for increases in their productivity and pay while those who can't fall behind.
"In most scenarios, AI will likely worsen overall inequality, a troubling trend that policymakers must proactively address to prevent the technology from further stoking social tensions," said the IMF. "It is crucial for countries to establish comprehensive social safety nets and offer retraining programs for vulnerable workers."
Guterres called on policymakers to work closely with the private sector—currently "in the lead on AI expertise and resources"—to "develop a governance model" for AI that is focused on "monitoring and mitigating future harms."
A systematic effort is also needed, said the secretary-general, "to increase access to AI so that developing economies can benefit from its enormous potential."
Along with the IMF and Guterres, global human rights group Amnesty International this week raised alarm about AI and the "urgent but difficult task" of regulating the technology, noting that in addition to changing how people and companies work, AI has the potential to be "used as a means of societal control, mass surveillance, and discrimination."
Police agencies in several countries have begun using AI for so-called "predictive policing," attempting to prevent crimes before they're committed, while officials have also deployed automated systems to detect fraud, determine who can and can't access healthcare and social assistance, as well as to monitor migrants' and refugees' movement.
Amnesty credited the European Union with making headway in regulating AI in 2023, closing out the year by reaching a landmark agreement on the AI Act, which would take steps to protect Europeans from the automation of jobs, the spread of misinformation, and national security threats.
The AI Act, however, has been criticized by rights groups over its failure to ban mass surveillance via live facial recognition tools.
"Others must learn from the E.U. process and ensure there are not loopholes for public and private sector players to circumvent regulatory obligations, and removing any exemptions for AI used within national security or law enforcement is critical to achieving this," said Amnesty.
In Davos on Wednesday, Guterres expressed hope that policymakers will agree on climate, AI, and other solutions that center human rights in the coming year, including at the U.N.'s Summit of the Future, planned for September.
"These two issues—climate and AI—are exhaustively discussed by governments, by the media, and by leaders here in Davos," said Guterres. "And yet, we have not yet an effective global strategy to deal with either. And the reason is simple. Geopolitical divides are preventing us from coming together around global solutions for global challenges."
"The only way to manage this complexity and avoid a slide into chaos," he said, "is through a reformed, inclusive, networked multilateralism."
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