The International Monetary Fund has warned that a further escalation in the Iran war could trigger a global recession, with the UK set to suffer the sharpest growth downgrade among G7 nations. In its half-yearly World Economic Outlook, the IMF cut its growth forecasts for 2026, citing the rising economic damage from the Middle East conflict.
Under a worst-case “severe scenario” involving a drawn-out war and persistently higher energy prices, the IMF said the world would face “a close call for a global recession” for only the fifth time since 1980. Global growth would collapse to about 2% this year, a threshold widely seen as equivalent to a worldwide recession.
The UK chancellor, Rachel Reeves, issued the government’s harshest rebuke yet to President Trump, blaming him for the war’s impact on families in the UK and worldwide. “To start a conflict without being clear what the objectives are and not being clear about how you are going to get out of it, I do think that is a folly,” she said.
The IMF lowered its forecast for UK growth this year by 0.5 percentage points to 0.8%, while warning that inflation would climb to almost 4% – double the government’s 2% target. The UK economy is particularly exposed to soaring energy prices and entered the conflict in a weak position after sluggish growth at the end of 2025.
In a central “reference forecast” assuming disruption fades by mid-2026, global growth would fall from 3.4% last year to 3.1% in 2026. Under an “adverse scenario” with oil prices near $100 this year, growth would fall to 2.5% and inflation to 5.4%. The IMF chief economist warned that every day of disruption pushes the world closer to that scenario.
