# Peak pessimism: the IMF, the media, and the market's very different view

_The S&P 500 hits a new all-time high just three weeks after flirting with a correction, while the IMF pencils in its worst-case scenario. Neil explains why the markets are reading the Gulf war — and the UK economy — more accurately than the forecasters, as Hormuz reopens and a peace deal moves into view._

Neil Woodford · 17 April 2026 · 8 min read

![Two people in front of an art piece spelling pessimism](https://cdn.sanity.io/images/v3acfbvo/production/ce8b6ce586033838c55ab0fdc9836f466b253191-4160x6240.jpg?w=1600&fit=max&auto=format)

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In a remarkable week, one that has followed many in recent times, the S&P 500 has reached an all-time high, only three weeks after falling 9% and approaching the official definition of a correction. This I think reflects the market's quite different interpretation of the war in the Persian Gulf and its consequences on energy prices, inflation and growth. Different in many respects from that represented by a very crowded western media consensus which appears to see the war as a catastrophic mistake, which has achieved nothing, and which will have a lasting and damaging impact on energy prices and the global economy.

Perhaps this more gloomy perspective was best represented by what we heard this week from the [IMF](https://www.imf.org/en/publications/weo/issues/2026/04/14/world-economic-outlook-april-2026). In its updated World Economic Outlook, the IMF presented three different scenarios of what it thought would happen as a result of the war. The updated reference forecast was described by the IMF as 'weaker', and the other two were the 'Adverse Scenario', and for those who really want to get depressed, the 'Severe Scenario'. Nowhere is there anything positive. Indeed, the IMF added in its commentary which accompanied the forecast update that 'the world is already drifting towards the more adverse scenario'. Finally, not satisfied that this was sufficiently downbeat, the IMF concluded that [the UK was uniquely badly positioned of all advanced economies](https://www.reuters.com/world/uk/uk-hit-with-big-imf-growth-downgrade-iran-war-fuels-inflation-2026-04-14/) and suggested that it would be the hardest hit by the energy shock from the Iran war. It downgraded its growth forecast for the UK this year to 0.8% (its previous forecast was for growth of 1.3%). Of course this gloomy perspective received a very warm welcome from the UK media which immediately indulged in another bout of self-flagellation verging on a celebration of the UK's uniquely poor position amongst all advanced economies.

Regular readers might remember that the track record of IMF forecasts is, in general, utterly woeful. So woeful in fact that it makes the OBR look perspicacious. On this occasion, the Jeremiah of economic forecasting was wrong again about the UK economy but this time within the space of about 24 hours. [UK GDP data released today](https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/february2026) showed that the economy expanded in February by 0.5%, massively above the consensus expectation of 0.1%. January's output was also revised up from flat to plus 0.1%. This means that if UK GDP is flat in March (positive early year momentum offset by concerns about the Gulf war) then growth in Q1 will be 0.7%. In other words, almost meeting the freshly downgraded year's forecast from the IMF in the space of three months. In my opinion the IMF's similarly gloomy view about UK inflation and the job market are also wrong. It sees inflation increasing to 4%, and unemployment reaching 5.6% this year. My guess is that the peak in inflation will be close to 3.5%, and although I expect the relatively weak labour market to deteriorate this year, I don't expect it to increase significantly from its current 5.2%.

So, back to the more upbeat view of the global economy from the world's financial markets. This week the S&P has reached another all-time high, but elsewhere government bond markets have seen yields fall this week and equity indices across the world have continued to recover. As I have already suggested, this reflects, clearly, a more optimistic take on the impact of the war and what is likely to happen next. The ceasefire, which many thought would not be agreed, has held this week, even with the US blockade in place. Israel and Lebanon have agreed a ceasefire, and there is some confidence building in a two-week extension to the US–Iran ceasefire and even talk of a more permanent peace deal, albeit that this will likely take longer to agree.

My sense is that there appears to have been a shift in the Iranian position which has led to this more positive backdrop and my guess is that the economic pressure being exerted on the Iranian economy by the blockade is what has catalysed this shift. As we rehearse in this week's Noise Cancelling podcast, the blockade has created a massive problem for Iran's struggling economy. Not only has it cut the regime's principal source of export earnings (80% comes from oil exports) but it has also cut off about 25–30% of government revenues. Before the blockade was implemented the Iranian economy was already confronting massive economic stress. Inflation is approaching 50%, the currency has lost a further 60% against the US$ since this time last year and cash withdrawals from banks are being severely limited. Perhaps even more significant is the fact that in about ten or so days Iran's oil storage infrastructure will be full and when it is, if the blockade is still in place, many of Iran's wells will have to be capped which could inflict very significant long-term damage on its oil production capacity. I believe it is these concerns which may have prompted a shift in the Iranian negotiating position, and which may lead not just to an extension to the ceasefire but positive engagement on a more permanent peace deal.

Of course, in this scenario, the widespread fears perhaps best represented in the IMF's gloomy global economic outlook, will not come to pass and a brighter near-term future for the global economy will quickly unfold. Clearly there can be no certainty about what happens next, but given the most recent developments in the Persian Gulf and the economic risks now confronting the Iranian regime, my guess is that first an extended ceasefire will be agreed, secondly that talks aimed at achieving a more permanent peace deal will continue, and finally, that normal traffic through the Strait of Hormuz will resume in the relatively near future.

## Late update: peace talks accelerate

Even I am surprised by the pace of developments in the negotiations between Iran and the US. It appears that Iran has agreed to open the Strait of Hormuz for the duration of the 10-day ceasefire between Israel and Hezbollah in Lebanon announced last night. This is being interpreted, rightly in my view, as a prelude to a more permanent peace solution between the warring parties not just in Lebanon but also between Iran and the US. According to [the Iranian Foreign Minister, the Strait of Hormuz are now 'completely open'](https://www.bloomberg.com/news/articles/2026-04-17/iran-says-hormuz-to-open-during-lebanon-truce-in-boost-for-peace) for commercial shipping. President Trump has added that the Strait are 'open and ready for business', albeit that the US naval blockade remains in place until a broader agreement is reached. Trump added that 'most of the points are already negotiated'.

Some details have emerged on [the Axios website](https://www.axios.com/2026/04/17/iran-us-deal-20-billion-frozen-funds-uranium) which suggest that the parties are negotiating a three-page plan to end the war with one aspect being that the US would release $20bn in frozen Iranian funds in return for Iran giving up its stockpile of enriched uranium. Trump has added that the Islamic Republic 'will not have nuclear weapons'.

My take on all this new information is that we are even closer to a comprehensive agreement to end the war than I had thought. Clearly, as the saying goes there's many a slip twixt cup and lip, but all the momentum appears to be pointing at agreement. Many column inches will be written about what has catalysed this shift in the willingness of the new Iranian regime to negotiate with the US, but my sense is that the blockade was a decisive move the importance of which should not be underestimated.

As I reflect on this conflict and hope that we are within touching distance of its end, once again I have to say that the media's consensual view about the war has been wrong on everything including its likely duration, what the US exit strategy might be, the blockade, the Iranian regime's intransigence and willingness to continue the conflict, its pointlessness, and ultimately, its duration and consequent impact on the global economy. In many respects I believe that the western media's visceral hatred of Donald Trump has blinded it and rendered it unable to objectively assess the war and what was likely to happen. Perhaps the comment that was most telling in this context was something I read in a Bloomberg article about two weeks ago which suggested that the Iranian regime had 'schooled' Donald Trump and the US military. As we look back now that just looks like a ludicrously bad call but it was not untypical of much of the coverage I read.

Clearly, if a permanent peace deal is finalised in the next few days, which looks increasingly likely, my guess is that energy prices have a lot further to fall and, as a result, financial markets, both bonds and equities, will rally further. Perhaps most significant of all, central banks can now get back to the business of cutting interest rates, and most obviously in the UK.

## UK energy policy

Yet again events unfolding in the global economy have shone a light on the insanity of the UK's energy policy. Not only has the IMF singled out the UK's unique vulnerability to an energy price shock (because of its dependence on energy imports) but energy policy decisions taken in Mexico and Canada have also highlighted the self-harming lunacy of the UK government's policy. On this occasion the Canadian energy minister has outlined a change in his country's energy policy which will now be focused on increasing output from Canada's oil sands, a pretty radical change from Justin Trudeau's recent anti-fossil fuel stance. In [an article on Bloomberg](https://www.bloomberg.com/opinion/articles/2026-04-15/how-to-make-drilling-for-oil-woke-again), the minister said:

> If you have the luxury of leaving it in the ground, God bless you. That's a choice few, if any, can afford. Certainly not Canada under his watch. I don't think that's how we're going to move forward in the world.

He added that for him the solution is to produce more energy and keep it affordable.

This decision follows [last week's announcement from Mexico's president](https://oilprice.com/Energy/Natural-Gas/Mexicos-Sheinbaum-Weighs-Fracking-Return-to-Cut-US-Gas-Dependence.html) and ex-climate scientist, Claudia Sheinbaum, who announced that Mexico would be tapping into shale oil and gas reserves in the country — something which until very recently had been taboo in Mexico.

Meanwhile, the UK government appears happy to allow the country to become even more dependent on imported electricity, oil and gas, and to promote an energy market that delivers the highest industrial electricity prices in the world — while preventing the exploitation of the UK's abundant oil and gas reserves in the North Sea and onshore in shale rock formations across the country, all, it would appear, on the altar of Ed Miliband's personal climate tokenism.

## What to look out for next week

There is once again a busy macro-economic calendar next week. In the UK the highlights will be wage growth, inflation, and retail sales data, and in the US initial jobless and continuing claims and a bunch of survey data. The Q1 results season will continue in the US and start to get busier in the UK. I suspect that most financial market attention will once again be focused on events in the Persian Gulf and, given what I expect to unfold, the more positive tone in equity and bond markets is likely to continue.