The IMF heads into its Washington meetings with a familiar job, but a much uglier backdrop: the global outlook is darkening just as the Iran war pushes oil and gas higher, adds to inflation and squeezes already stretched households. The shock is landing after years of pandemic fallout, Russia’s invasion of Ukraine and a tariff fight that had not yet broken the recovery, so policymakers are now trying to contain damage rather than celebrate resilience.
The IMF is expected to cut its 2026 growth forecasts and raise its inflation assumptions in Tuesday’s world economic outlook. That leaves governments with a nasty trade-off: support households and firms hit by dearer energy, or risk making inflation stickier and debt burdens heavier. Kristalina Georgieva has urged officials not to lean on protectionist subsidies, price caps or export controls, and instead to use targeted, temporary help.
Markets have already done some of the work for them. Brent crude has slipped from a peak near $120 a barrel earlier in the conflict, but it still sits above the roughly $72 level seen before the war, keeping pressure on transport, food and manufacturing costs. With much of the damage to infrastructure likely to linger and insurance costs elevated, a quick return to the pre-war playbook looks unlikely.
For central banks, the message is grimly simple, and it is not one they can escape easily. Without the war, rates might have been drifting lower this year; instead, markets expect them to stay on hold, or rise, if inflation refuses to come back down. That is the bind in Washington this week, slower growth, pricier energy and fewer policy tools just as voters grow more impatient with the bill.
