The World Bank has lowered its global growth forecast for 2026 to 2.5 per cent, warning that the conflict in the Middle East has triggered a fresh shock to the global economy by disrupting energy markets, fuelling inflation and weakening growth prospects across much of the world.

In its latest 'Global Economic Prospects' report released in June 2026, the World Bank said, "The global economy is facing another major shock. The conflict in the Middle East has triggered sharp increases in energy prices, renewed inflationary pressures, and fueled expectations of tighter monetary policy."

The multilateral lender projected global growth to slow from 2.9 per cent in 2025 to 2.5 per cent in 2026, calling it "the lowest rate since the COVID-19 pandemic."

It said the slowdown reflects weaker prospects for energy-importing economies and countries directly affected by the hostilities.

According to the report, the conflict has sharply altered the global outlook, with "about two-thirds of economies around the world facing weaker growth prospects."

The World Bank said disruptions to energy and commodity supplies from the Gulf region have led to a sharp rise in prices. "Overall, commodity prices are expected to rise by 22 per cent in 2026, in contrast to the 7 per cent decline expected in January," the report noted.

It added that the disruptions are expected to keep energy prices elevated, with "the Brent crude oil price averaging $94/barrel (bbl) in 2026, an increase of 36 per cent over 2025 and more than 50 per cent above the January projection."

European natural gas prices are also projected to rise by about 30 per cent this year due to tighter global LNG availability. The report said higher energy costs have reignited inflationary pressures globally.

"The increase in commodity prices has led to a notable resurgence of inflationary pressures," it said, adding that headline inflation expectations have risen across both advanced and developing economies.

The World Bank warned that the economic fallout could worsen if the conflict escalates further. "A renewed escalation of hostilities or more prolonged disruptions to commodity flows could further raise commodity prices, intensify inflationary pressures and food insecurity, trigger financial stress, and lower growth," the report said.

In its downside scenario, the World Bank said global growth could slow dramatically. "If energy supply disruptions prove more severe than assumed and are accompanied by substantial financial stress, global growth could fall to just 1.3 per cent in 2026."

Despite the gloomy outlook, the report identified artificial intelligence (AI) as a potential source of stronger future growth. "On the upside, broader investment in and adoption of artificial intelligence (AI) could lift activity," it said.

Published on June 13, 2026