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The World Bank cut its global economic growth forecast for 2026 to 2.5% on Thursday, warning that growth could fall to 1.3% if prolonged energy disruptions spread into financial markets, Reuters reported.
The bank lowered its forecast by 0.1 percentage point from its January estimate as the Middle East war drove up energy and fertilizer prices, renewed inflationary pressure and raised expectations of tighter monetary policy.
The 2026 forecast represents the weakest global growth rate since the COVID-19 pandemic began in late 2019.
Global growth reached 2.9% in 2025, 0.2 percentage points higher than the bank’s January estimate, according to its semiannual Global Economic Prospects report.
The World Bank lowered forecasts for about two-thirds of countries because of the war, with some of the sharpest reductions affecting the United Arab Emirates, Iraq and other Middle Eastern economies whose energy exports have been disrupted.
The World Bank’s baseline forecast assumes that Brent crude oil will average $94 per barrel in 2026, 36% higher than in 2025.
It also assumes that the most serious disruptions to energy supplies will ease by the end of July and that global headline inflation will average 4%.
The bank said global growth could slow further to 2.1% if the disruptions lasted longer and oil prices averaged $115 per barrel during the year.
Under that scenario, inflation could rise to 4.4%.
The outlook could deteriorate further if the energy shock spreads to financial markets, reducing confidence and increasing volatility.
In that case, global growth could fall to just 1.3%, the bank said.
“These risk scenarios show how quickly the outlook could weaken if energy and financial pressure reinforce each other,” World Bank Deputy Chief Economist Ayhan Kose said.
Kose warned that confidence could decline rapidly if the energy shock triggered broader financial market stress.
The revised outlook came as the war launched by U.S. and Israeli strikes on Iran on Feb. 28 entered its fourth month.
The closure of the Strait of Hormuz has sharply increased energy prices, revived global inflationary pressure and strengthened expectations that central banks could maintain tighter monetary policies.
Fertilizer prices have also risen significantly, raising concerns about a possible food supply crisis.
Oil prices closed nearly $2 higher on Wednesday after U.S. President Donald Trump said Washington would strike Iran “very hard” if a peace agreement was not finalized.
His warning followed one of the most significant exchanges of fire since the April ceasefire.
The World Bank projected that developing economies would grow by 3.6% in 2026, down from 4.4% in 2025 and the lowest rate since the pandemic.
The bank said weak growth had stalled progress in developing economies toward advanced-country income levels.
Dozens of developing countries, excluding China and India, were facing what the report described as a “lost decade,” with no progress in narrowing their per capita income gaps with advanced economies.
World Bank Chief Economist Indermit Gill said the global economy was less resilient than it had been in 2008 or 2018.
“The world economy is a lot less resilient today than it was in 2008 and even as compared with 2018,” Gill said.
He said the coming years would likely be marked by high policy uncertainty, inflationary pressure and elevated interest rates.
The World Bank lowered Türkiye’s 2026 economic growth forecast by 0.9 percentage points to 2.8%.
The bank also sharply reduced its growth forecast for the Middle East, North Africa, Afghanistan and Pakistan region.
Growth in the region is now projected at 1.6% in 2026, a reduction of 2.7 percentage points from the previous forecast and down from 4% in 2025. The region could rebound to 5% growth in 2027, according to the report.
The United Arab Emirates is expected to grow by 2.4% in 2026, down from the January forecast of 5% and the 6.2% growth recorded in 2025.
The World Bank maintained its forecast of 2.2% growth for the U.S. economy in 2026. U.S. growth is expected to ease to 2.1% in 2027 and 2% in 2028.
The euro area is projected to grow by 0.8% in 2026, down from 1.4% in 2025.
Japan’s economy is expected to expand by 0.7%, compared with 1.1% in 2025.
China’s growth forecast was lowered by 0.2 percentage points to 4.2% in 2026 after the economy expanded by 5% in 2025.
India is expected to remain the world’s fastest-growing large economy, with growth of 6.6% in 2026 after 7% in 2025.
Gill said India was expected to maintain relatively strong growth rates for the next two decades.
Global growth is projected to improve to 2.8% in both 2027 and 2028. However, that rate would remain 0.4 percentage points below the average recorded during the 2010s.
The World Bank linked the weaker long-term outlook to slower population growth, weaker private investment growth, falling public investment, rising public debt and slower expansion in global trade.
The report said the combination of structural weakness, higher borrowing costs and continuing policy uncertainty would leave the global economy less resilient to additional shocks.
The bank warned that a prolonged energy crisis, renewed inflation and financial market pressure could further weaken both advanced and developing economies if the Middle East conflict continued to disrupt global energy supplies.
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