WASHINGTON D.C. — International Monetary Fund Managing Director Kristalina Georgieva warned that the six-week-old Middle East conflict involving Iran will permanently scar the global economy even if a durable peace deal is reached. She delivered the assessment in a speech ahead of the IMF's annual spring meetings in Washington, D.C.

Had the conflict not broken out six weeks ago, the IMF would have upgraded its global growth outlook for 2026, Georgieva said. "But now, even our most hopeful scenario involves a growth downgrade. Even in a best case, there will be no neat and clean return to the status quo."

Last autumn, the IMF forecast global growth of 3.2% in 2025 and 3.1% in 2026. All scenarios in the fund's World Economic Outlook now show a permanent hit to living standards. She said the world economy had entered the conflict with momentum fueled by technology investment and supportive financial market conditions, but infrastructure damage, supply disruptions, losses of confidence, and other effects linked to the war would inflict losses regardless of whether peace is achieved.

She said shipping in and out of the Persian Gulf is uncertain and that restoring production at damaged oil and gas facilities across the region could take time. The Strait of Hormuz is a route for energy supplies that fuel the world economy. She said the future of transits through the Strait of Hormuz and the recovery of regional air traffic remained unknown, and that growth would be slower even if a new peace proved durable.

Six weeks into the conflict, the fate of a conditional ceasefire announced late on Tuesday is at risk because Washington and Tehran disagree on its terms. Global oil prices rose on Thursday as conditions in financial markets remained volatile.

She said net oil-importing nations, poorer countries, and small-island nations would experience larger growth downgrades than other countries. She recommended that governments reject unilateral actions such as export and price controls, warning that such measures could further destabilize global conditions.

She urged governments to focus on targeted and temporary support measures for the most vulnerable households, warning that costly blanket tax cuts or energy subsidies could stoke inflation and undermine fragile public finances. She also said central banks should keep interest rates on hold but remain prepared to act to curb inflation. "All countries must deploy their limited fiscal resources responsibly, and most must move decisively to rebuild space after this shock. I cannot emphasise this enough," she said.

Bank of England Governor and Financial Stability Board Chair Andrew Bailey also commented on market conditions. "We've obviously had a very big shock in the last month or so, with the conflict breaking out in the Middle East, that has prompted, obviously, much greater market volatility. At least we got up yesterday and found the world was still with us, but it obviously is very volatile," Bailey said.