World Bank warns Middle East conflict will slow global growth

Shafaq News- Washington

The World Bank on Thursday warned that the conflict in the Middle East will push global economic growth to its weakest level since the COVID-19 pandemic, citing higher energy prices, rising inflation, and increased borrowing costs.

In its latest Global Economic Prospects report, the bank forecast global growth at 2.5% in 2026, down from 2.9% in 2025, while lowering projections for nearly two-thirds of the world's economies compared with its January estimates.

Growth is expected to recover slightly to 2.8% in 2027 but remain below historical averages.

The report said disruptions linked to the closure of the Strait of Hormuz have unsettled energy markets, with Brent crude projected to average $94 per barrel in 2026, up 36% from 2025 levels, assuming the most severe disruptions ease by July.

The World Bank also expects global inflation to rise to 4% this year from 3.3% in 2025, driven by higher energy and fertilizer prices that are expected to increase food costs worldwide.

The bank warned that risks remain elevated. In a scenario involving prolonged energy supply disruptions and tighter financial conditions, global growth could slow to just 1.3% in 2026 while inflation rises to 4.4%.

Developing economies are expected to grow by 3.6% this year, down from 4.4% in 2025, before recovering to 4.2% in 2027. The report said slower growth is hampering efforts by many developing countries to narrow income gaps with advanced economies.

The World Bank expects Gulf economies to expand by around 5% in 2027 and 2028, supported by recovering trade and public spending.

To help countries cope with the crisis, the World Bank Group said it has made between $50 billion and $60 billion available in financing, including $25 billion in pre-arranged funding. The institution said support could rise to as much as $100 billion over the next 15 months if economic conditions deteriorate further.