Key points
- The World Bank’s latest Global Economic Prospects report warns ongoing Middle East conflict will slow 2026 global economic growth to 2.5%.
- Escalating energy prices, rising inflation, and increased borrowing costs are weighing heavily on economies worldwide.
- Global inflation is projected to climb to 4.0% this year, heavily driven by energy market disruptions and spiked fertilizer costs.
- Developing economies are expected to drop to a post-pandemic growth low of 3.6% in 2026 before recovering slightly in 2027.
- The institution has deployed up to $60 billion in financial assistance to help developing nations manage the severe economic strain.
Main Story
The ongoing conflict in the Middle East is expected to slow global economic growth to its lowest level since the COVID-19 pandemic, according to the World Bank’s latest Global Economic Prospects report.
An official statement released by the bank’s Online Media Briefing Centre on Thursday highlighted that elevated energy prices, rising inflation, and increased borrowing costs are applying severe downward pressure on economies worldwide.
The landmark report downgraded growth forecasts for approximately two-thirds of the world’s economies compared to its January assessment, projecting global expansion to decline to 2.5% in 2026 from the 2.9% recorded in 2025. While global economic activity is tipped to improve slightly to 2.8% in 2027, this rate remains 0.4 percentage points below the structural average achieved during the 2010s.
The report warned that persistently weak growth across developing nations has completely stalled progress toward attaining advanced economic income levels. Excluding economic giants China and India, developing economies are currently on track to face nearly a decade without making any meaningful progress toward closing their per capita income gap with advanced nations by 2028.
A substantial portion of the current macroeconomic strain is attributed to disruptions in global energy channels following the operational closure of the strategic Strait of Hormuz. Under the baseline assumption that the worst of these disruptions ease by July, Brent crude oil prices are projected to average $94 per barrel in 2026—a steep 36% spike over 2025 levels.
Additionally, the bank forecasted massive surges in fertilizer prices, warning that high input costs will inevitably drive up global food prices and push global inflation to 4.0% this year, up from 3.3% in 2025. Downside risks remain substantial; if further energy disruptions trigger severe financial stress, global growth could collapse to 1.3% in 2026, while inflation could climb to 4.4%.
Regionally, economic growth in developing countries is expected to drop to a post-pandemic low of 3.6% in 2026, down from 4.4% in 2025, before recovering to 4.2% in 2027. Gulf economies directly caught in the conflict zone will face the hardest hit, with growth slowing from 3.9% in 2025 to near zero in 2026, though a rebound to 5% is forecast for 2027–2028 as reconstruction begins.
South Asia is expected to remain the world’s fastest-growing region despite slowing from 7% in 2025 to 6.3%. Conversely, Sub-Saharan Africa is projected to experience a visible economic slowdown, primarily due to rising domestic food prices linked to global fertilizer shortages and high operating costs.
To cushion the blow, the World Bank has made between $50 billion and $60 billion available through existing financial channels to help developing countries navigate the crisis. The emergency intervention includes $25 billion in pre-arranged financing for fiscal support, social safety nets, and targeted liquidity assistance for vulnerable businesses and farms.
More than 30 nations are already utilizing the response plan, and the lender stands prepared to scale its total emergency support to between $80 billion and $100 billion over a 15-month window if the conflict and its economic consequences persist.
The Issues
- Securing global energy transit routes to reverse the closure of the Strait of Hormuz and cool off $94-per-barrel oil prices.
- Mitigating food insecurity risks in Sub-Saharan Africa fueled by spiked fertilizer costs and supply shortages.
- Mobilizing private capital and restructuring local policy frameworks to prevent developing nations from facing a lost decade of income growth.
What’s Being Said
- Outlining the core responsibilities of global financial leadership, World Bank Group President Ajay Banga stated: “developing countries have faced a series of challenges over the past decade. The impact differs by country, but the basic test is the same: protect people and preserve stability today, without giving up on growth and jobs tomorrow. Our job is to help countries steady the ship, keep reforms moving, and emerge on the other side.”
- Emphasizing the potential to leverage the economic crisis for structural transformation, Ayhan Kose, the World Bank’s Deputy Chief Economist and Director of the Prospects Group, noted: “The conflict has taken a toll on global activity, but every crisis also brings an opportunity. This moment should be used to strengthen policy frameworks, invest in infrastructure, accelerate business-enabling reforms, and mobilise private capital to support job creation at scale,”
What’s Next
- More than 30 developing countries will continue working alongside the bank to execute rapid response plans and strengthen fiscal preparedness.
- Energy and trade analysts will closely monitor the Strait of Hormuz through July to see if maritime supply disruptions begin to ease as projected.
- The World Bank will trigger its expanded 15-month financing window to release up to $100 billion in capital if global inflation and geopolitical tensions persist.
Bottom Line
Driven by Middle East conflict and shipping blockages that have pushed oil toward $94 a barrel, the World Bank warns global growth will sink to a post-pandemic low of 2.5% in 2026, prompting a $60 billion emergency funding rollout to steady fragile developing economies.
