Key facts
- Global growth forecast for 2026 cut to 2.5% by the World Bank.
- The Middle East conflict is driving higher energy prices and increased uncertainty.
- Brent crude oil prices are projected to average $94 a barrel in 2026.
- Global inflation is expected to rise to 4.0% in 2026.
- Developing economies' growth forecast slashed to 3.6% for 2026.
- The World Bank is prepared to offer up to $100 billion to affected countries.
The global economy is facing significant headwinds, with the World Bank projecting a slowdown to 2.5% growth in 2026, the weakest performance since the COVID-19 pandemic. This downgrade is primarily attributed to the ongoing conflict in the Middle East, which has disrupted energy markets and fueled inflation.
The World Bank's latest Global Economic Prospects report indicates that forecasts for two-thirds of the world's economies have been revised downward. The closure of the Strait of Hormuz has severely impacted energy markets, leading to a projected average Brent crude oil price of $94 a barrel in 2026, a 36% increase from 2025 levels. Fertilizer prices are also expected to rise significantly, contributing to higher food prices and pushing global inflation to an estimated 4.0% in 2026, up from 3.3% in 2025.
Developing economies are particularly vulnerable, with their growth forecast slashed to 3.6% for 2026, a post-pandemic low. The report highlights that these countries have faced a series of challenges over the past decade, and the current shock is exacerbating their economic fragility. Economies in the Gulf region, directly impacted by the conflict, are expected to see their growth plummet from 3.9% in 2025 to near zero in 2026, though a rebound to around 5% is predicted for 2027-28.
Despite the grim outlook, the United States, a major energy producer, is expected to maintain its growth forecast of 2.2% for 2026, benefiting from tax cuts and AI investment. However, ordinary Americans are still experiencing higher gasoline and other prices. The World Bank Group has pledged to support affected countries, standing ready to provide up to $100 billion in financing, guarantees, and private-sector solutions over the next 15 months to help countries navigate the crisis and preserve stability.