The World Bank has downgraded its global growth forecast due to the war in the Middle East

The World Bank has lowered its forecast for global economic growth in 2026 to 2.5% year-on-year. The main reason for the pessimistic outlook is the war in the Middle East, which has now been ongoing for four months following strikes by the US and Israel on Iran. This is according to Reuters.

World Bank analysts are considering three scenarios:

• Base case scenario (2.5% year-on-year growth): The average price of Brent crude will be $94 per barrel (+36% compared to 2025 levels), supply disruptions will subside by the end of July, and global inflation will settle at 4%.
• Prolonged crisis (2.1% year-on-year growth): If the energy shortage persists, the price of oil will rise to $115 per barrel, and inflation will accelerate to 4.4%.
• Pessimistic scenario (1.3% year-on-year growth): The energy shock could trigger panic in financial markets, leading to a fall in investor confidence and a sharp slowdown in economic growth.

In its half-yearly Global Economic Prospects report, the bank has downgraded its forecasts for two-thirds of the world’s countries. The UAE, Iraq and other states in the region have been hit hardest, as their energy exports have suffered a significant blow. It is worth noting that global growth stood at 2.9% in 2025.

Hostilities and the closure of the Strait of Hormuz have already triggered a sharp rise in energy and fertiliser prices, exacerbating global inflation and the threat of a food crisis. Geopolitical tensions remain an additional source of pressure: oil prices have surged again following US President Donald Trump’s statements regarding his readiness to deal a severe blow to Iran should the peace agreement collapse.

In 2027–2028, a modest recovery in the global economy to 2.8% year-on-year is expected. However, this figure remains 0.4 percentage points below the average for the 2010s, which is explained by demographic decline, reduced investment, high public debt and a slowdown in global trade.

As reported by GMK Center, major international organisations forecast global economic growth of 2.9–3.2% y/y in 2025. This is significantly lower than the historical average for 2000–2019 (3.7% y/y), indicating a slowdown in global growth.