IMF warns global recession risk from Hormuz blockade

The International Monetary Fund (IMF) warned this week that the ongoing conflict involving the United States, Israel, and Iran could escalate into an energy shock large enough to push the world economy toward recession. The IMF said the risk is tied in particular to the U.S. blockade of the Strait of Hormuz, a key route for global energy shipments, and to the possibility of damage to critical energy facilities.

The warning was published in the IMF’s latest World Economic Outlook and coincided with Australian Treasurer Jim Chalmers attending the IMF’s spring meetings in Washington D.C. In comments linked to the report, IMF chief economist Pierre-Olivier Gourinchas said the global economy is facing a “difficult test” because of the Strait of Hormuz closure and the risks to energy infrastructure.

The IMF set out three scenarios to illustrate how the conflict could transmit into the global economy through oil prices, inflation, and growth. In the most severe case, the IMF said global growth could fall to 2% in 2026 if oil prices average $110 this year and $125 next year. The report noted that growth at that level has occurred only four times since 1980 , typically during major economic crises.

In a more adverse scenario, the IMF assumed oil prices average $100 per barrel through 2026 . Under that path, the IMF projected global economic growth of 2.5% this year , which would be lower than the 3.3% forecast it published in January. The IMF also said global inflation would rise to 4.4% in that scenario.

Even under a relatively benign outcome—where the IMF assumes the conflict ends within weeks and energy markets return to normal by mid-year—the report still showed spillovers. The IMF said Australia’s economic growth for 2026 is downgraded to 2% , and that inflation is expected to average 4% this year .

The IMF’s scenarios highlight uncertainty around the duration of the conflict, the status of the Strait of Hormuz, and the extent of any damage to energy facilities. The report frames these risks as a direct channel into global markets via energy prices, with knock-on effects for inflation and growth across major economies.