World Bank Slashes 2026 Global Growth Forecast to 2.5% Amid Middle East Conflict
The World Bank reduced its 2026 global growth forecast to 2.5%, the lowest since the pandemic, due to the Middle East conflict, according to a June 2026 report. The institution cited rising energy prices and inflation, which averaged 4% globally, as key drivers of the downgrade. “We are providing liquidity where needed now and prepared for additional financing if pressures intensify,” said World Bank President Ajay Banga.
Why Is the World Bank Lowering Its Growth Outlook?
The World Bank’s Global Economic Prospects report attributed the revised forecast to the war between the U.S., Israel, and Iran, which has disrupted energy markets. The conflict has pushed Brent crude prices to $94 per barrel, according to the report, while supply chain disruptions from the closure of the Strait of Hormuz have exacerbated inflation. “Asia is the most affected region, with Western and Southern Asia facing energy and commodity shocks,” noted Indermit Gill, the bank’s chief economist.
Which Countries Are Most Vulnerable?
Two-thirds of global economies saw reduced growth projections in the report. Emerging markets like the United Arab Emirates, Saudi Arabia, Turkey, and Bangladesh face the steepest declines. Asia’s energy-dependent economies, including the Philippines and parts of Southeast Asia, are particularly vulnerable to rising fuel and mineral prices. “The war in any region is bad for the poor,” Gill emphasized, highlighting the disproportionate impact on low-income nations.
What Is the World Bank Doing to Mitigate the Crisis?
The World Bank announced immediate access to $60 billion in emergency funding for developing nations, with potential increases to $100 billion over 15 months. The funds aim to address liquidity shortages and support private-sector solutions. “We are ready to scale up financing, guarantees, and private-sector partnerships if needed,” Banga said. The bank also called for global coordination to stabilize food prices, as fertilizer shortages have disrupted agriculture in regions like sub-Saharan Africa.
How Could the Situation Worsen?
The World Bank warned that prolonged energy disruptions could push global growth to 1.3%, with inflation rising to 4.4%. The report cited risks to financial markets and investor confidence if supply chain bottlenecks persist. “A decade of setbacks for developing economies is now likely,” the report stated, referencing the 2020-2029 period as a “lost decade” for recovery due to repeated shocks like the pandemic, climate change, and the Russia-Ukraine war.
What Are the Implications for Food Security?
The closure of the Strait of Hormuz has cut global fertilizer supplies by a third, threatening food production. “If the conflict continues, food prices will rise, hitting North Africa and sub-Saharan Africa hardest,” Gill said. The report noted that 12% of the global population already faced severe food insecurity in 2025, up from 10% in 2019. It urged the creation of humanitarian corridors and emergency food aid mechanisms.
What Is the Global Response?
The World Bank’s report called for an end to conflicts in Ukraine, the Middle East, and Central Africa, stressing that “new wars” would deepen economic instability. While no immediate ceasefire has been announced, the institution emphasized the need for “coordinated global policy action” to address inflation, energy security, and food supply chains. “The window to prevent a lost decade is closing,” the report concluded.