Iran war drags the global economy into a cycle of uncertainty.

Iran war-related tensions are pushing the global economy into a prolonged period of uncertainty, with the IMF expected to cut its global growth outlook next week as policymakers assess the conflict’s expanding effects involving the US, Israel and Iran. Central bank governors and senior economists from major economies are set to meet in Washington for the IMF-World Bank Spring Meetings, where uncertainty is likely to be a central theme.

Cause: conflict risk and policy constraints

Experts say the economic damage could last even if the current ceasefire holds. Brookings’ Eswar Prasad warned that the global economy is “misaligned,” and that disruption is likely to push inflation higher. He added that the scale of the growth impact depends on how long the war lasts, noting that if no solution emerges in the coming weeks, regional spillovers in the Middle East could become a major global risk.

Central banks face a difficult trade-off: controlling inflation while supporting growth, despite limited policy space. High public debt and large deficits in many advanced economies constrain the ability to respond aggressively.

Development: what the IMF and institutions are watching

IMF Managing Director Kristalina Georgieva said that, absent the war, the IMF might have raised its growth projection. With damage to infrastructure, supply-chain disruptions and diminished confidence, even an optimistic scenario would likely require a downward revision.

Financial institutions also warn that an energy shock could have lasting effects. Ajay Rajadhyaksha of Barclays said: “Even if the war ends, the price remains.” Citi’s Beata Manthey noted that even a ceasefire cannot fully reverse the costs and inflation pressure, making it harder for households.

Data and indicators: pre-war momentum vs. the new outlook

Brookings research cited in the article indicates that before the war, global growth was strongest since the post-pandemic period. The Brookings-FtTiger index pointed to improvements in activity, financial markets and investor confidence, suggesting a robust global recovery—though the current outlook now depends heavily on how the conflict evolves.

Impact: inflation pressure, energy flows and growth risks

Independent Economics said higher costs and risks are expected to persist and that energy flows will take time to recover. It compared the likely effects to the 1970s, stating that these events will drive a “profound restructuring” of the economy, finance and geopolitics.

OECD economist Stefano Scarpetta said that if Hormuz trade resumes, the OECD could keep its lower forecast rather than shift to a more negative scenario. He also said forecasts remain unchanged, while uncertainty around potential damage to energy infrastructure in the Gulf remains unresolved.

Ricardo Amaro of Oxford Economics said a ceasefire could reduce the risk of a more severe short-term disruption, but that the agreement is fragile. Bank of America economists told clients that even if a ceasefire holds, it will be difficult to return to pre-war conditions as energy disruptions persist, growth slows and inflation rises.

Analysis: scenarios and remaining uncertainty

JPMorgan chief economist Bruce Kasman said large energy-supply shocks typically curb growth and lift inflation. He warned that while the war could produce a moderate, temporary inflationary trend globally, the risk of prolonged Hormuz disruption remains a major threat to the world economy.

Some analysts believe the world could avoid a worse outcome if energy flows through Hormuz resume soon. However, the article emphasizes that overall uncertainty remains high and that the global outlook will continue to depend on near-term geopolitical developments.