Iran war will hit UK growth the hardest of any rich economies, IMF says

The U.K. will suffer the biggest hit to growth of all of the world's richest economies because of the Iran war, the International Monetary Fund warned on Tuesday.

In its latest World Economic Outlook, the IMF projected that the U.K. economy will now grow by just 0.8% in 2026, down from 2025's 1.3% projection.

That's the largest cut to growth of any G7 economy, with the U.K. set to lag the U.S., which is projected to grow 2.3% in 2026, as well as the euro area (1.1%), Spain (2.1%), France (0.9%).

The IMF said the global economy now faces a major test as a result of the ongoing war in the Middle East, having weathered the trade and tariff upheaval last year. It warned that a protracted conflict could further worsen the outlook, while growing public debt and eroding institutions' credibility risks further damage.

"A longer or broader conflict, worsening geopolitical fragmentation, a reassessment of expectations surrounding artificial‑intelligence‑driven productivity, or renewed trade tensions could significantly weaken growth and destabilize financial markets," the IMF said.

"Fostering adaptability, maintaining credible policy frameworks, and reinforcing international cooperation are essential to navigating the current shock while preparing for future disruptions in an increasingly uncertain global environment."