Middle East conflict slows global growth in 2026 – World Bank

The World Bank Group’s latest Global Economic Prospects indicates that the Middle East conflict is pushing global growth to the lowest rate since the COVID-19 era amid increased borrowing costs, higher energy prices and inflation.

Global growth is expected to slow to 2.5% in 2026 from 2.9% in 2025, with two-thirds of economies downgraded relative to January of 2026. ‘

The growth may also rise to 2.8% in 2027, but around 0.4 percentage points below the average during the 2010s.

The reports released on Thursday, says by 2028, developing economies, other than China and India, will have experienced nearly a decade of no progress on narrowing their per capita income gap with advanced economies.

It says the Strait of Hormuz closure has acutely disrupted energy markets, with Brent crude oil prices projected to average $94 a barrel in 2026, 36% above 2025 levels, if the worst interruptions ease in July.

Fertilizer prices are forecast to skyrocket this year, with knock-on effects for food prices. Cumulatively, the factors are upthrusting global inflation, which is predicted to rise to 4.0% in the coming months, up from 3.3% in 2025.  

However, if energy supply cuts prove more severe than is witnessed and substantial financial stress occurs, global growth may fall to 1.3% in 2026, and inflation will rise to 4.4%, the Global Economic Prospects finds.

Ajay Banga, President of the World Bank Group, said although developing countries have faced a series of challenges in the last decade, the basic test remains protecting people and preserving stability, without giving up on growth and jobs.

“We are providing liquidity where it is needed. We are ready with additional financing, guarantees, and private-sector solutions if pressures deepen,” Banga assured. “Our job is to help countries steady the ship, keep reforms moving, and emerge stronger on the other side.”

Ayhan Kose, World Bank Group’s Deputy Chief Economist and Director of the Prospects Group, insists now is the time to “strengthen policy frameworks, invest in infrastructure, accelerate business-enabling reforms, and mobilize private capital to support job creation at scale.”

In response to the Middle East crisis, the World Bank is providing $50–60 billion through existing instruments, including $25 billion of pre-arranged financing to support the most vulnerable people, boost fiscal capacity, and provide working capital as well as liquidity support for firms and farms.