World Bank warns conflict could sharply slow global growth

Anabelle Colaco
13 Jun 2026, 16:30 GMT+10

The World Bank has lowered its global growth forecast for 2026, warning that a prolonged disruption to energy supplies caused by the war in the Middle East could trigger a much sharper slowdown and increased financial market stress
In its latest Global Economic Prospects report released June 11, the World Bank forecast global growth of 2.5% in 2026, down from its January estimate of 2.6%
The bank cut growth forecasts for about two-thirds of the world's economies, with some of the largest downgrades affecting the United Arab Emirates, Iraq and other Middle Eastern countries whose energy exports have been disrupted by the conflict

WASHINGTON, D.C.: The World Bank has lowered its global growth forecast for 2026, warning that a prolonged disruption to energy supplies caused by the war in the Middle East could trigger a much sharper slowdown and increased financial market stress.

In its latest Global Economic Prospects report released June 11, the World Bank forecast global growth of 2.5% in 2026, down from its January estimate of 2.6%. Global growth reached 2.9% in 2025, 0.2 percentage point higher than the bank's January projection.

The bank cut growth forecasts for about two-thirds of the world's economies, with some of the largest downgrades affecting the United Arab Emirates, Iraq and other Middle Eastern countries whose energy exports have been disrupted by the conflict.

The report comes as the war that began with U.S. and Israeli strikes on Iran on Feb. 28 enters its fourth month. The conflict has pushed energy prices higher following the closure of the Strait of Hormuz, fueled inflation concerns and raised expectations that central banks may keep monetary policy tighter for longer. Fertilizer prices have also risen sharply, raising concerns about food supplies.

The World Bank's baseline forecast assumes Brent crude oil will average $94 a barrel this year, up 36% from 2025 levels, and that major energy supply disruptions will ease by the end of July. Under that scenario, global inflation is projected at 4%.

However, the bank warned that if energy disruptions persist and oil averages $115 per barrel this year, global growth could slow to 2.1% while inflation rises to 4.4%.

A more severe scenario involving stress in financial markets could push global growth down to just 1.3%, the bank said.

"These risk scenarios show how quickly the outlook could weaken if energy and financial pressure reinforce each other," said Ayhan Kose, the World Bank's deputy chief economist.

"If the energy shock triggered a financial market shock, confidence could erode quickly," he added.

The World Bank expects global growth to improve to 2.8% in both 2027 and 2028, but that would still remain below the average pace recorded during the 2010s.

"The world economy is a lot less resilient today than it was in 2008 and even as compared with 2018," World Bank Chief Economist Indermit Gill told reporters.

He said slower population growth, weaker private and public investment, rising public debt and slower trade expansion were weighing on longer-term prospects.

Developing economies are expected to be hit particularly hard. Growth in those countries is forecast to slow to 3.6% in 2026 from 4.4% in 2025. The report warned that many developing nations outside China and India risk experiencing a "lost decade" with little progress in narrowing income gaps with advanced economies.

The World Bank maintained its forecast for U.S. growth at 2.2% in 2026. China's economy is expected to grow 4.2%, while the euro area is forecast to expand 0.8% and Japan 0.7%.

India is expected to remain the world's fastest-growing major economy, with GDP growth projected at 6.6% in 2026 following 7% growth in 2025.

The sharpest regional downgrade was for the Middle East, North Africa, Afghanistan and Pakistan region, where growth is now projected at 1.6% in 2026, down from 4% in 2025.