IMF cuts West Asia, North Africa growth forecast to 1.1% over Iran war

The International Monetary Fund has cut its forecast for growth in the Middle East and North Africa to 1.1 percent for 2026. This is a reduction and it is mainly because of the war in Iran and the problems it is causing for the economy.

1. Overview of the Cut in the IMF Forecast

The International Monetary Funds latest report on the world economy, which was released in April 2026 shows that things are not looking good for the Middle East and North Africa.

The growth forecast has been reduced to 1.1 percent in 2026.

This is a cut, 2.8 percentage points less than what was thought before.

The reason for this cut is the war in Iran and the economic problems it is causing.

This is one of the reductions in the forecast for any region in the world and it shows just how badly the war has affected the economy.

2. What Caused This Cut in the Forecast?

2.1 The War in Iran

The economic problems started with the war in Iran in 2026. This war involved countries, including

Iran,

the United States and its allies and

the countries in the Gulf.

A important thing that happened was that the war blocked the Strait of Hormuz which is a very important route for oil to be shipped around the world.

Why the Strait of Hormuz Matters:

It is used to ship twenty percent of the worlds oil.

It is very important for countries that export gas.

It is also important for shipping and trade around the world.

The war caused problems, including

blockades

attacks on oil facilities and

disruptions to shipping.

As a result there was the disruption to the oil supply in history.

3. The Direct Impact on the Middle East and North Africa

3.1 The Collapse of Oil Exports

countries in the Middle East and North Africa rely heavily on oil exports. The war caused

oil production to decrease

exports to be disrupted and

damage to infrastructure.

Even countries with a lot of oil were affected because

they could not export their oil efficiently and

their supply chains were disrupted.

The International Monetary Fund said that the disruptions to the energy sector were a reason for the slowdown in the economy.

3.2 The Economic Collapse in Iran

Iran was badly affected by the war.

Its economy is expected to shrink by 6.1 percent.

The country is facing tough sanctions and a lot of damage from the war.

It is also very isolated from the rest of the world in terms of trade.

This had an impact on the average economic growth for the whole region.

3.3 The Impact on the Gulf Countries

The countries in the Gulf were also affected.

For example the growth forecast for Saudi Arabia was cut to 3.1 percent.

Other countries, such as Kuwait, Iraq and Bahrain are expected to experience a contraction.

The reasons for this include

attacks on oil facilities

disruptions to exports

reduced confidence among investors.

3.4 The Impact on Countries that Import Oil

Countries that import oil, such as Egypt were affected in ways.

They faced

bills for importing oil,

more inflation and

pressure on their currencies.

The International Monetary Fund forecast that the growth in Egypt would slow down to 4.2 percent.

4. The Global Energy Crisis

The war triggered a big energy crisis, similar to the one in the 1970s.

4.1 The Increase in Oil Prices

Oil prices went up sharply to between eighty and one hundred dollars per barrel.

The shortage of oil got worse.

4.2 The Crisis in Gas and Fertilizer Supplies

The war also disrupted the supply of gas and fertilizer.

This led to

food prices,

a spike in inflation around the world.

4.3 The Impact of Inflation

The International Monetary Fund increased its forecast for inflation to 4.4 percent.

This is very important because

inflation reduces the purchasing power of people

it slows down consumption.

It hurts economic growth.

5. The Disruption to Trade and Supply Chains

5.1 The Shipping Crisis

The war disrupted the trade routes, including the Strait of Hormuz.

This led to

increased costs for shipping insurance

delays in cargo shipments.

5.2 The Global Impact

Many countries were affected, including

countries in Asia that import a lot of oil,

countries in Europe that rely heavily on energy and

countries in Africa that face shortages of fuel.

As a result there was a slowdown in trade and production around the world.

6. The Impact on Financial Markets

6.1 The Uncertainty Among Investors

The war created a lot of uncertainty, which made investors pull back.

This led to

reduced investment,

money flowing out of the country and

volatility in the currency markets.

6.2 The Decline in Stock Markets

The stock markets in the Gulf region lost a lot of value.

The global markets became very volatile.

6.3 The Risk of Higher Interest Rates

The central banks may increase interest rates to control inflation. They may delay cutting rates.

This would slow down growth even further.

7. Why the Growth Forecast Was Cut to 1.1 Percent

The forecast of 1.1 percent reflects the shocks that the economy has experienced including

the disruption to the energy sector

the collapse of trade

the surge in inflation

the decline in investment

the damage caused by the war and

the impact on neighboring countries.

All these factors combined to reduce economic output.

8. Comparison with the Previous Forecast

The new forecast is very different from the one.

The growth forecast for the Middle East and North Africa has been cut from 3.9 percent to 1.1 percent.

This is a reduction of 2.8 percentage points.

This is a change, not just a small adjustment.

9. The Wider Global Impact

9.1 The Slowdown in Global Growth

The International Monetary Fund has cut its forecast for growth to 3.1 percent in 2026.

9.2 The Impact on Emerging Economies

The growth forecast for emerging economies has been cut to 3.9 percent.

These economies are more vulnerable to

energy costs

shocks to the currency and

other external factors.

9.3 The Uneven Impact

Some countries will be affected more than others.

The countries that export energy, such as Russia may benefit.

The countries that import energy will be hurt.

10. The Risk of Stagflation

The current situation raises the risk of stagflation which’s a combination of

slow economic growth and

high inflation.

This is a difficult situation to fix with economic policies and it can have a big impact on

jobs and

incomes.

11. The Social and Economic Consequences

11.1 The Increase in Unemployment

The slowdown in the economy will lead to

job losses and

higher unemployment.

11.2 The Impact on Migration

The war may cause workers to return to their home countries from the Gulf region, which can disrupt the labor market.

11.3 The Increase in Poverty

The rising prices and lower incomes will lead to an increase in poverty.

12. The Long-Term Damage

The war may have a lasting impact on the economy including

reduced investor confidence,

a setback to diversification and

damage to the regions reputation as a stable place to do business.

13. The Future Outlook

13.1 The Possible Recovery

The International Monetary Fund expects that the economy may recover in 2027 if the war ends.

The growth forecast for that year is 4-5 percent.

13.2 The Conditions for Recovery

The recovery depends on

the end of the conflict

the restoration of oil flows,

stable energy prices and

the return of investor confidence.

13.3 The Risks

If the war continues the global economy may slow down further and there is a risk of recession.

14. The Key Points to Remember

The International Monetary Fund has cut the growth forecast for the Middle East and North Africa to 1.1 percent because of the war in Iran.

The main reasons for this cut are

the disruption to oil supplies,

the collapse of trade

the surge in inflation and

the decline in investment.

The economy of Iran is shrinking quickly.

The wealthy countries in the Gulf are also affected, despite their oil wealth.

The global economy is slowing down.

The decision by the International Monetary Fund to cut the growth forecast for the Middle East and North Africa to 1.1 percent is not a statistical adjustment. It reflects a deep economic shock caused by the conflict in the region.

The war in Iran has triggered

an energy crisis,

a disruption to trade

a surge in inflation and

instability.

Because the Middle East is so important to the energy supply the instability in the region has global consequences, not just regional ones.

The future now depends heavily on

peace negotiations,

stability in the oil markets and

policy responses, around the world.

If the conflict is resolved quickly recovery is possible.

If not the world may face a period of slow growth and high inflation.