FINWIRES · TerminalLIVE
FINWIRES

IMF Lowers 2026 Global Economic Outlook Amid Iran War Risks

By
IMF Lowers 2026 Global Economic Outlook Amid Iran War Risks

The International Monetary Fund lowered global economic growth expectations for 2026 as the impact of the Middle East war will likely counter a boost from rising artificial intelligence adoption.

The IMF now projects real gross domestic product for the world to grow by 3% this year, down 0.1 percentage points from its prior forecast in April. The latest projection represents a slowdown from a 3.5% rate in 2025, according to the IMF.

"The modest slowdown reflects the effects of the war in the Middle East being partly offset by accelerated demand-driven momentum in the global technology cycle, thanks to advances in artificial intelligence and its adoption," the IMF wrote in its latest world economic outlook update Wednesday. "The impact varies widely based on countries' exposure to the war and position in the technology value chain."

US growth is projected at 2.3% in 2026, unchanged from April.

President Donald Trump threatened additional strikes against Iran on Wednesday following renewed hostilities between Washington and Tehran. Trump said the memorandum of understanding agreed with Iran last month is "over."

For 2027, the IMF expects global GDP to accelerate to 3.4%, up 0.2 percentage points from its previous estimate. The US outlook improved by 0.1 percentage points to 2.2%.

The global economy has so far weathered the effects from the war "better than feared," with relatively limited repercussions from elevated commodity prices, according to the IMF.

The agency raised its global inflation forecasts to 4.7% and 3.9% in 2026 and 2027, respectively, from 4.4% and 3.7% previously projected.

"These projections indicate that the disinflation trend in place since the beginning of 2024 has stalled," according to the IMF.

Risks to the outlook remain tilted to the downside as the possibility of a renewed Middle East conflict "looms large," the IMF said. A potential correction in technology expectations could also weigh on estimates.

"Upside risks stem from a swifter-than-expected normalization in energy markets, stronger-than-expected technology investment, a revival of durable cooperation that lowers trade barriers, and structural reform that raises medium-term growth," the agency wrote.

Related Articles

Japan Bank Lending Remains at Strongest Level Since March 2021
US Markets

Japan Bank Lending Remains at Strongest Level Since March 2021

Japan's bank lending rose 5.7% year over year in June, matching May's pace and remaining at its strongest level since March 2021, according to preliminary data released by the Bank of Japan on Wednesday.The reading came in slightly below the consensus forecast of a 5.8% increase tracked by Investing.com.Outstanding loans at major, regional, and shinkin banks reached 676.1 trillion yen in June, up from 670.8 trillion yen in May.Lending by major and regional banks accelerated to 6.3% from 6.2%.Loans at major banks increased 8.7% from 8.6%, while lending by regional banks edged up to 4.3% from 4.2%.Lending by shinkin banks, which primarily serve small businesses and local communities, was unchanged at 1.7% from a year earlier.The BOJ raised its policy rate to 1% earlier in June, the highest level since 1995. Even after the increase, Japan's borrowing costs remain well below those in other major economies.The continued strength in lending points to resilient demand for credit despite higher interest rates, supporting the view that the economy can withstand further policy normalization.That is in line with the BOJ's latest Tankan survey, which showed an improvement in corporate financial conditions for the first time in a year, while large firms said conditions for issuing commercial paper had become more favorable."Supported by the generative AI investment boom and resilient production activity, the economy is unlikely to falter in the near term," Bloomberg quoted Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute and a private-sector member of Prime Minister Sanae Takaichi's economic and fiscal panel, as saying.Bloomberg reported that Japan is close to notching its longest uninterrupted economic growth streak since World War II, as the economy weathers higher oil prices from the Iran conflict and the central bank's ongoing efforts to normalize monetary policy.

Nikkei 225
Update: Dow Snaps Record Run Amid Tech Sell-Off, Oil Price Jump
US Markets

Update: Dow Snaps Record Run Amid Tech Sell-Off, Oil Price Jump

(Updates with market moves at the end of the day.)The Dow Jones Industrial Average retreated from record high on Tuesday as technology stocks sold off, while oil prices jumped amid renewed concerns over the Middle East situation.The Dow fell 0.3% to settle at 52,925.15 after logging back-to-back closing highs in the past two sessions. The technology-heavy Nasdaq Composite fell 1.2% to 25,818.7, while the S&P 500 shed 0.5% to 7,503.9.Among sectors, industrials saw the steepest decline followed by tech, while energy led gainers.Chipmaker Intel's (INTC) shares slumped 9.7%, the worst performer on the S&P 500. Western Digital (WDC), Marvell Technology (MRVL), Sandisk (SNDK), Advanced Micro Devices (AMD), Applied Materials (AMAT), Micron Technology (MU) also saw declines."Equities are rotating out of technology after Monday's rebound, as an Asian chip selloff revived (artificial intelligence)-valuation worries and pushed (South Korea's) KOSPI down 7.5%," Saxo Bank said in a report.A global tech sell-off on Tuesday followed the release of preliminary quarterly results by Samsung Electronics, as well as a Reuters report on Chinese firm DeepSeek developing its own AI chip that could allow it to rely less on US chipmaking giant Nvidia (NVDA) and Huawei.West Texas Intermediate crude oil was up 4.9% at $71.91 per barrel in Tuesday late-afternoon trade, while Brent advanced 5.1% to $75.67.Iran attacked a Qatari LNG ship transiting near the Strait of Hormuz, the world's most important chokepoint for crude flows, according to Qatar's foreign ministry spokesperson Majed Al Ansari.The US Treasury Department revoked the waiver allowing Iran to sell its oil, CNBC reported."Iran will only reap benefits if they exhibit good behavior," CNBC quoted a US official as saying. "Iran's actions in the Strait were wholly unacceptable to the United States and will be met with consequences."US Treasury yields were higher, with the 10-year rate up 6.6 basis points at 4.55% and the two-year rate rising 5.6 basis points to 4.18%.In economic news, the US trade deficit grew in May to its widest since March 2025, as imports increased and exports fell, government data showed."Surging imports and a rare decline in exports spiked the US trade deficit to its highest level in more than a year," BMO Capital Markets said in a note. "Despite tariffs, the trade deficit has returned to levels of late 2024, before importers began front-loading purchases, suggesting little overall progress in shrinking the trade gap."In company news, SpaceX (SPCX) drew bullish views from Wall Street as the rocket and satellite company joined the Nasdaq 100 index, with analysts pointing to AI, satellite connectivity and space-enabled solutions as key growth drivers.Deutsche Bank, RBC Capital Markets and Morgan Stanley initiated coverage of SpaceX with their highest ratings.SpaceX shares slumped 6.8%.Gold fell 1.1% to $4,122.80 per troy ounce, while silver lost 2.9% to $60.52 per ounce.

Dow JonesNasdaq CompositeS&P 500$AMAT$AMD$INTC$MRVL$MU$NVDA$SPCX$WDC
Truist Earnings Path Uncertain Amid Leadership Changes, Rate Hike Prospects, UBS Says in Downgrade
US Markets

Truist Earnings Path Uncertain Amid Leadership Changes, Rate Hike Prospects, UBS Says in Downgrade

Truist Financial's (TFC) upcoming leadership changes and the growing prospects of a Federal Reserve rate hike have introduced fresh uncertainty to the financial service company's earnings potential in the near term, UBS Securities said Tuesday.The brokerage downgraded its rating on the Truist stock to neutral from buy and reduced its price target to $55 from $58.Last month, the company said Michael Lyons will become its chief executive, effective Sept. 1, replacing Bill Rogers, who will assume the executive chair role."While (Truist's) shares have lagged peers this year, the recently announced CEO change and the prospect of rate hikes in the forward curve cloud near-term visibility on the leadership roster, talent retention, near-term (earnings-per-share) power, and recently introduced medium-term targets," UBS analyst Erika Najarian said in a note to clients Tuesday. "Until Mr. Lyons firms his leadership line-up, (Truist) could be vulnerable to talent turnover."The prospects of the Fed tightening its monetary policy this year have increased amid growing inflationary concerns recently.UBS lowered its EPS outlook for Truist to $4.50 from $4.60 for 2026 and to $5 from $5.15 for next year."While valuation is undemanding, we think (Truist) may be a value trap, as the market awaits the potential for revisions on leadership, strategy, and financial targets on the back of a new outsider CEO appointment," Najarian said. "Even if these first moves are executed well, it will likely take time for financial results to reflect these changes."Earlier this month, Morgan Stanley downgraded its ratings on the stocks of Truist and Prosperity Bancshares (PB), saying the companies are bracing for a more intense competition for deposits in the medium term, which could hurt their earnings.Price: $51.51, Change: $+0.09, Percent Change: +0.18%

$PB$TFC