The escalating conflict in the Middle East is expected to slow global economic growth to its weakest pace since the COVID-19 pandemic, as surging energy prices, rising inflation and higher borrowing costs weigh on economies worldwide, the World Bank said on Thursday.
In its latest Global Economic Prospects report, the lender projected global growth of 2.5 percent in 2026, down from 2.9 percent in 2025, with forecasts for nearly two-thirds of the world’s economies downgraded since January.
While growth is expected to recover modestly to 2.8 percent in 2027, it would remain below the average pace recorded during the 2010s, reflecting persistent challenges facing both advanced and developing economies.
The report highlighted the severe impact of disruptions in the Middle East, particularly the closure of the Strait of Hormuz, a critical global energy shipping route.
The World Bank forecasts Brent crude oil prices to average US$94 per barrel in 2026, a 36% increase from 2025 levels, assuming the most severe disruptions ease by July. Fertiliser prices are also expected to rise sharply, adding pressure to global food costs.
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As a result, global inflation is projected to accelerate to 4.0 percent in 2026, up from 3.3 percent in 2025, complicating efforts by central banks to ease monetary policy and support economic activity.
The outlook could deteriorate further if energy supply disruptions become more severe and trigger financial market stress. Under such a scenario, the World Bank said global growth could plunge to just 1.3 percent in 2026, while inflation could climb to 4.4 percent .
“Developing countries have faced a series of challenges over the last decade,” World Bank President Ajay Banga said in a statement.
“The impact differs by country, but the basic test is the same: protect people and preserve stability today, without giving up on growth and jobs tomorrow,” he said.
Growth in developing economies is expected to slow sharply to 3.6 percent in 2026, from 4.4 percent in 2025, marking the weakest pace since the pandemic. Although growth is projected to rebound to 4.2 percent in 2027, the report warns that many developing countries are falling further behind advanced economies in income levels.
According to the report, developing economies excluding China and India are on track to complete nearly a decade without narrowing the per-capita income gap with wealthier nations.
The Gulf economies directly affected by the conflict are expected to suffer some of the largest setbacks. Growth in these countries is projected to tumble from 3.9 percent in 2025 to near zero in 2026 before recovering to around 5 percent in 2027 and 2028 as trade resumes and reconstruction spending gathers pace.
Sub-Saharan Africa is also expected to face headwinds, particularly from rising inflation and higher food prices linked to fertiliser shortages and increased agricultural input costs.
The World Bank forecasts growth in the region to ease slightly to 4.0 percent in 2026 from 4.1 percent estimated in 2025, before strengthening to 4.4 percent in 2027.
South Asia is expected to remain the world’s fastest-growing region despite a slowdown. Economic growth there is projected at 6.3 percent in 2026, down from 7.0 percent in 2025, before rebounding to 6.9 percent in 2027.
To help countries weather the crisis, the World Bank said it is prepared to make up to US$100 billion available over the next 15 months if economic conditions deteriorate further.
The institution said it is immediately mobilising US$50 billion to US$60 billion through existing financing instruments, including US$25 billion in pre-arranged funding, to support social safety nets, strengthen government finances and provide liquidity for businesses and farmers.
More than 30 countries are already working with the World Bank to enhance preparedness and ensure rapid access to financial support if needed.
The report also warned that rising debt burdens are limiting the ability of many developing countries to respond to crises. Aggregate public debt in developing economies has risen from less than 40 percent of GDP in 2010 to more than 70 percent of GDP, increasing borrowing costs and reducing fiscal space for investment.
World Bank Deputy Chief Economist Ayhan Kose said the crisis should serve as a catalyst for reforms.
“The conflict has taken a toll on global activity, but every crisis also brings an opportunity,” he said, urging countries to strengthen economic policies, improve infrastructure and mobilise private investment to support long-term growth and job creation.
The report underscores the growing economic fallout from the Middle East conflict, with policymakers worldwide now facing the twin challenge of containing inflation while supporting slowing growth in an increasingly uncertain global environment.
