World Bank Cuts Global Growth Forecast to 2.5% Amid Iran War

The World Bank has lowered its global growth forecast for 2026 from 2.9% to 2.5%, citing the ongoing war in the Middle East as a major factor, according to reports from Reuters, The Guardian, and Al Jazeera.

The bank's revised outlook warns that if energy supply disruptions worsen and financial markets are affected, growth could slow dramatically to just 1.3%. This forecast comes amid rising oil prices due to the closure of the Strait of Hormuz and renewed inflationary pressures worldwide. The World Bank assumes an average Brent crude oil price of $94 per barrel for 2026, a significant increase from last year's levels.

According to Reuters, the bank has lowered growth forecasts for two-thirds of countries, with the biggest cuts affecting Middle Eastern nations like the United Arab Emirates and Iraq. The Guardian reports that developing economies, excluding China and India, face a 'lost decade' without progress in narrowing their income gap with advanced economies.

The World Bank's report highlights several risks to global economic stability. As reported by Al Jazeera, the fragile ceasefire between the US and Iran could deteriorate further, exacerbating supply disruptions. The bank also warns about rising government debt levels in developing countries, which makes it harder for them to cushion their populations from economic shocks.

According to the Los Angeles Times, the United States is expected to grow 2.2% this year, unchanged from a January forecast and up slightly from 2.1% in 2025. As a major energy producer, the U.S. economy benefits from big tax cuts and booming investment in artificial intelligence. However, ordinary Americans are still frustrated by more costly gasoline and other prices.

The World Bank has slashed its 2026 growth forecast for developing and emerging market countries by 0.4 percentage points to a post-pandemic low of 3.6%. In these countries, the disruption in energy supplies and sharp increase in energy prices caused by the conflict have dampened confidence and weakened broader economic activity.

China's economic growth is expected to register at 4.2% this year, down from 5% in 2025 and from the 4.4% forecasted earlier this year. India is once again expected to be the world’s fastest-growing major economy, expanding by 6.6% this year; however, this is a significant decrease from 7.7% in 2025.

The 21 European countries that share the euro currency are collectively expected to eke out 0.8% growth this year, down from 1.4% in 2025. The war has also disrupted trade in fertilizer, much of which is exported through the Persian Gulf, potentially leading to food shortages as farmers skimp on fertilizer to avoid higher costs.