Middle East Conflict Threatens Global Trade Growth in 2026
Escalating conflicts in the Middle East are poised to significantly impact global trade growth in 2026, potentially driving up energy prices and creating instability in food and services markets. The World Trade Organization (WTO) issued a warning on Thursday, March 19, 2026, outlining the potential for a sharper slowdown in trade than previously anticipated.
WTO Report Highlights Key Risks
According to the WTO’s updated Global Trade Outlook and Statistics Report, sustained tensions – particularly those stemming from recent US and Israeli actions in the region – could have a substantial negative effect on the global economy. WTO Director-General Ngozi Okonjo-Iweala stated that the continued rise in energy prices could increase risks to global trade, with potential impacts on food security and cost pressures for consumers and businesses [1].
Specifically, the report indicates that if the conflict persists and energy prices remain elevated, global merchandise trade growth could fall from a projected 1.9% to 1.4% in 2026 [3]. Disruptions to travel and transportation sectors are as well expected to reduce trade volumes. The impact on services trade could be equally significant, potentially subtracting 0.7 percentage points from growth in 2026 due to risks to international transport and travel [2].
Potential for Offset by AI-Driven Growth
Despite the looming risks, the WTO report acknowledges a potential offsetting factor: continued strong growth in trade related to artificial intelligence (AI). If trade in AI-related goods maintains the momentum seen in 2025, it could boost overall growth by 0.5 percentage points. The report notes that which factor will ultimately predominate remains uncertain.
Impact on Specific Sectors
The conflict’s potential to disrupt key shipping and air routes could lead to structurally elevated transport and fuel costs. Prolonged conflict could also negatively impact regional tourism and global travel demand [4]. A prolonged blockade of the Strait of Hormuz, a critical waterway, could jeopardize a third of global urea imports for fertilizer, threatening food security in major agricultural producers like India, Thailand, and Brazil.
2025 Trade Surge and China’s Role
The WTO noted that 2025 saw unexpectedly strong trade growth, reaching 4.6%, driven in part by the surge in AI-powered products and companies front-loading orders to avoid tariffs. This contrasts with an earlier forecast of 2.4% growth.
The report also highlights a shifting role for China, which is increasingly exporting machines rather than consumer goods, becoming a “factory of factories” – a role traditionally held by Germany. The report suggests that Germany and Europe missed an opportunity to fill the gap when the US reduced imports from China, with Asian countries and India responding more quickly and flexibly.
Global Economic Outlook
The WTO currently projects global economic growth of 2.8% in 2026. However, this forecast is contingent on the resolution of the Middle East conflict and the continued strength of the AI sector.