IMF warns Iran war is fueling inflation and slowing global growth

Tuesday 07 April 2026 - 16:00

By: Dakir Madiha

IMF warns Iran war is fueling inflation and slowing global growth

Six weeks into the U.S.-led military campaign against Iran, the economic fallout is accelerating. The closure of the Strait of Hormuz, a strategic passage through which roughly 20% of the world's oil supply flows, has sent crude prices surging, pushed U.S. gasoline to its highest level in nearly four years, and drawn warnings from the International Monetary Fund and Wall Street about a prolonged period of elevated inflation.

The ISM services price index jumped 7.7 percentage points in March to reach 70.7, its highest level since October 2022 and the largest monthly increase in more than 13 years, according to the Institute for Supply Management. All 17 service sectors tracked reported price increases without exception. The spike reflects the pass-through of energy costs that have climbed steadily since the war began on February 28, when Iranian attacks on merchant vessels effectively closed the strait.

U.S. gasoline prices have tracked the rise in crude. The AAA reported a national average of $4.14 per gallon on April 7, crossing the $4 threshold for the first time since August 2022 and rising more than $1 compared to a month ago. Crude oil traded around $110 per barrel in recent sessions, with West Texas Intermediate briefly surpassing $114 last week before retreating amid chaotic ceasefire negotiations.

IMF Managing Director Kristalina Georgieva told Reuters the conflict is already fueling inflation and slowing global growth. She said all paths now lead to higher prices and weaker growth, and that even if the war were to stop today, a lasting negative impact on the rest of the world would remain. The Fund plans to revise its global growth forecasts downward and raise its inflation projections when it publishes its World Economic Outlook report on April 14.

JPMorgan Chase CEO Jamie Dimon echoed that concern in his annual shareholder letter published Monday. He identified rising oil prices and geopolitical uncertainty as potential triggers for an economic tipping point, warning that inflation could rise slowly rather than fall in 2026.

The Bureau of Labor Statistics is set to release the March Consumer Price Index on April 10, and economists anticipate a sharp acceleration. The Federal Reserve Bank of Cleveland's real-time inflation projections point to a 0.84% monthly gain, which would push the annual rate from 2.4% in February to around 3.2%. Prediction markets forecast a similar range of 3.2% to 3.4%. The Federal Reserve raised its own 2026 inflation projections at its March meeting, lifting the PCE index forecast from 2.4% to 2.7%, the largest single-year adjustment in recent years. The OECD went further, projecting that U.S. inflation could reach 4.2% this year if the conflict continues.