The news: The global economy is weathering conflict in the Middle East better than expected, according to the International Monetary Fund (IMF)’s latest forecast. Its economists said risks of a global recession are fading—although that assumes the ceasefire between the US and Iran remains in force, an assumption that looks increasingly unlikely as the US resumes strikes in the region.

By the numbers: The IMF expects the global economy to grow 3% this year—down from 3.5% growth in 2025 but not far off its April forecast of a 3.1% increase. While continued fallout from the war is weighing heavily on economies reliant on oil imports and exports, the AI boom is expected to drive growth in others, particularly the US.

Among advanced economies, the US will be one of the few to report faster economic growth this year compared with 2025—2.3% versus last year’s 2.1%—due to tech investments, fiscal policy, and fewer negative effects from the war with Iran. However, other major economies, including the euro area, China, and India, face slower growth from war-related energy shocks, depressed consumer confidence, and broader uncertainty.

Implications for retailers: The IMF’s cautious optimism may already be outdated. Recent assertions from President Donald Trump raised the prospect of renewed hostilities between the US and Iran, which could once again choke the Strait of Hormuz and send oil prices spiking. In that event, even the so-far resilient US economy would likely suffer: A sustained energy shock could cost the retail industry nearly $37 billion in sales this year, as consumers redirect more dollars to gas spending and pull back on discretionary purchases.