US-Iran war to pull global economy to post-COVID low: World Bank
World Bank cuts 2026 global growth forecast to 2.5% as Middle East conflict drives up energy, inflation and borrowing costs.
Intelligence analysis by GPT-5.4 Mini
The World Bank says the US-Iran war and the closure of the Strait of Hormuz are pushing the world economy toward its weakest growth since COVID-19. It warns that worse supply disruptions could deepen inflation and drag growth far lower, especially in developing countries.
The World Bank says a war in the Middle East could make the world economy slow down a lot, like a car running low on gas. If oil and shipping get more expensive, everyday things like food and fuel can cost more too.
Analysis
Growth downgraded
The World Bank says the conflict in the Middle East is now a major drag on the global economy. In its latest Global Economic Prospects report, it cut its 2026 world growth forecast to 2.5% from 2.9% in January, pointing to higher energy prices, rising inflation and more expensive borrowing.
Oil, food and inflation pressure
A central concern is Iran’s closure of the Strait of Hormuz, a key route for oil and gas shipments after hostilities with the US and Israel. The bank says Brent crude is expected to average $94 a barrel this year, which would be 36% above last year’s average. It also expects fertilizer prices to rise sharply, which could feed into food prices. On that basis, global inflation is forecast at 4% this year, up from 3.3% last year.
Worst-case scenario
The report says the outlook could worsen if energy supply disruptions deepen. In that case, global growth could fall to 1.3% this year and inflation could rise to 4.4%. The bank also says two-thirds of countries have had their growth forecasts downgraded since January.
Developing countries under strain
The World Bank warns that developing countries are on the front line of the fallout. Excluding China and India, it says many developing economies have made little progress over the past decade in narrowing the income gap with richer countries. World Bank president Ajay Banga said governments need to protect people and preserve stability now without abandoning growth and jobs later. The bank says it has set aside up to $60bn in support for affected developing countries, and could raise that to $100bn if the conflict continues.
Key points
- The World Bank cut its 2026 global growth forecast to 2.5% from 2.9%.
- It says the US-Iran war and the Strait of Hormuz closure are driving up energy costs and inflation.
- Brent crude is expected to average $94 a barrel this year, 36% above last year.
- The worst case would see global growth slow to 1.3% and inflation rise to 4.4%.
- The World Bank says it can provide up to $60bn in support for affected developing countries, and more if needed.
If the fragile ceasefire holds and energy flows stabilize, the world economy could avoid the report’s worst-case outcome. The World Bank’s support package for developing countries could also help soften the blow and keep economies and jobs from sliding further.
If supply disruptions worsen, the World Bank says global growth could fall to 1.3% this year and inflation could climb to 4.4%. Higher oil, fertilizer and borrowing costs would likely hit developing countries hardest and could deepen food and debt stress.
