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The World Bank (WB) has downgraded its global economic forecast, warning that the war in the Middle East will slow global growth to 2.5% in 2026—the lowest level since the pandemic.
The WB noted that the military conflict has led to higher energy prices, accelerated inflation, and increased borrowing costs.
In 2027, global economic growth will accelerate to 2.8%, but will remain 0.4 percentage points below the 2010s average. The organization expects two-thirds of the world's countries to face a deterioration in economic prospects.
The main reason for the forecast revision was disruptions in the energy market following the closure of the Strait of Hormuz. The World Bank expects the average price of Brent oil in 2026 to be $94 per barrel, 36% higher than last year. Rising fertilizer prices will add additional pressure, potentially leading to higher food prices.
Against this backdrop, global inflation will accelerate to 4%, up from 3.3% a year earlier. However, the World Bank warns that the risks of further deterioration remain significant: if energy supply disruptions are more severe and accompanied by financial instability, global economic growth could slow to 1.3%, and inflation could rise to 4.4%.
Developing economies will be hit hardest by the crisis. The Bank forecasts that growth in this group of economies will slow to 3.6%, the lowest level since the end of the pandemic. The Gulf States will be hit hardest, with economic growth potentially coming to a virtual standstill in 2026. By 2028, the decade's progress in narrowing the per capita income gap between developing economies (excluding China and India) and advanced economies will be virtually nonexistent. An additional challenge remains the growing debt burden: total public debt in developing countries has increased from less than 40% of GDP in 2010 to more than 70% of GDP today.
While the crisis is having the greatest impact on developing countries, South Asia will be the driving force of the global economy, with the highest growth rates expected. However, this region will also face a significant slowdown – from 7% in 2025 to 6.3% in 2026.
As the situation worsens, the World Bank is prepared to provide $50-60 billion in financing to developing countries, including $25 billion in pre-agreed financing. More than 30 countries are already working with the organization to prepare their crisis response measures. If the situation worsens, the level of support could be increased to $80-100 billion over the next 15 months.
"In response to the current shock, we are providing liquidity where it is needed immediately and are prepared to deploy additional financing, guarantees, and private sector solutions if pressure intensifies. “Our role is to help countries stabilize, continue reforms, and emerge from the crisis more resilient and stronger,” said Ajay Banga, President of the World Bank Group.