IMF warns Iran war oil shock could derail U.S. disinflation

IMF Managing Director Kristalina Georgieva warned this week that the energy shock from the Iran war-Brent crude up about 23% to near $90 a barrel-could lift inflation and slow global growth. She cautioned that the U.S. disinflation trend could stall if higher oil prices persist.

Georgieva explained that pricier energy can raise fuel, shipping and logistics costs, feed into consumer prices, and dent confidence. In her words, “We cannot take the victory against inflation as given,” adding that “now is the time for advanced economies to relearn this lesson.”

Oil’s rise has tracked the widening conflict. Brent has moved from roughly $73 a barrel before the latest strikes to around $90. Several banks have raised price forecasts, reflecting uncertainty over supply routes.

Goldman Sachs lifted its second‑quarter 2026 Brent forecast by $10 to $76 a barrel and outlined a path to $100 if traffic through the Strait of Hormuz is disrupted for weeks. Standard Chartered increased its first‑quarter 2026 view to $74 from $62, its second quarter to $67 from $63, and its 2026 average to $70 from $63.50.

UBS now projects first‑quarter Brent averaging $71, implying around $80 in March, and raised its 2026 average to $72. ANZ put its first‑quarter 2026 average at $90.

In the U.S., consumer price inflation was 1.4% in 2020, rose to 7.0% in 2021, eased to 6.5% in 2022, then fell to 3.4% in 2023, 2.9% in 2024 and 2.7% in 2025. The latest reading for January 2026 showed a 2.4% year‑over‑year increase.

Policy conditions have also shifted. After holding the federal funds rate at 5.25%–5.50% from July 2023 through September 2024, the Federal Reserve cut by 50 basis points in September 2024 and by 25 basis points in November and December. Three more quarter‑point reductions in September, October and December 2025 brought the target range to 3.50%–3.75%, where it remained at the January 28, 2026 meeting.

Futures pricing in early March pointed to roughly even odds of another rate cut by June or July, with probabilities increasing after the U.S. jobs report on March 6.

Georgieva highlighted thinner fiscal buffers than in past downturns, which could limit governments’ ability to absorb higher energy costs without adding to public debt or demand. She noted that would leave monetary policy with more of the adjustment if inflation re‑accelerates.

She framed the oil shock as an external test of disinflation progress. A sustained rise in crude could pass through to gasoline and transport, lift input costs for manufacturers, and keep headline inflation elevated even as core measures cool.

Forecast ranges for Brent in 2026 now cluster in the low‑to‑mid $70s, with some projections calling for higher prices in the first half of the year. Prolonged constraints at key chokepoints raise the risk of $100 Brent.