The International Monetary Fund (IMF) on Thursday, 9 July said the global economy has remained resilient despite the economic shock triggered by the Middle East conflict, with artificial intelligence (AI)-led investment and productivity gains helping offset the drag from surging energy, fertiliser, and food prices. The Fund, however, cautioned that uncertainty remains exceptionally high and that the burden of the conflict has fallen unevenly across nations.

Two Opposing Forces Shaping the Global Economy

Julie Kozack, Director of the IMF's Communications Department, speaking at the Fund's regular press briefing, described the current global situation as a tug-of-war between two powerful forces. 'We have the negative supply shock from the war, which has pushed up commodity prices, particularly energy, fertiliser and food prices,' she said. On the other side, she noted, 'we have a positive demand and productivity shock, which is coming from the technology cycle and particularly AI-led investment.'

Kozack summarised the net effect plainly: 'There's two forces that are pulling the global economy in somewhat different directions, and the overall impact has been a resilient global economy.' This framing positions AI not merely as a corporate trend but as a macroeconomic stabiliser — a notable shift in how multilateral institutions are characterising the technology cycle.

Who Bears the Heaviest Burden

Despite the headline resilience, the IMF was clear that the pain has not been shared equally. Countries that are commodity importers with limited fiscal space — largely lower-income and emerging-market economies — have faced the full force of higher fuel, fertiliser, and food costs while capturing fewer of the productivity benefits associated with AI and advanced technology adoption.

This asymmetry is a recurring concern in the Fund's assessments. Nations without the digital infrastructure or fiscal headroom to invest in technology-led productivity are effectively absorbing the war's costs without access to the offsetting gains, widening the gap between advanced and developing economies.

IMF's World Economic Outlook: Key Assumptions

Kozack outlined the assumptions underpinning the Fund's July World Economic Outlook (WEO) update, released on Wednesday, 8 July. The forecast assumes that transit through the Strait of Hormuz begins to normalise by mid-July and that the average oil price in 2026 will be approximately $89 per barrel.

'Those are the assumptions that have gone into the July WEO update,' Kozack confirmed, adding that the IMF will continue to monitor developments in oil markets, commodity prices, and Hormuz shipping to assess their implications. Critically, the current forecast does not assume an immediate return to pre-war conditions, reflecting the continued uncertainty surrounding both the conflict and global energy markets.

Uncertainty Remains Elevated, IMF Warns

'We still anticipate that uncertainty will remain elevated,' Kozack said, a signal that the Fund's cautious tone is unlikely to soften in the near term. The IMF has increasingly placed uncertainty itself at the centre of its global economic outlook — a departure from earlier frameworks that focused primarily on growth projections.

The revised WEO also flagged geopolitical tensions and volatile commodity markets as persistent risks. For India and other large emerging markets, the interplay between global energy prices and domestic inflation remains a key variable to watch in the months ahead.