By Catherine Blake | May 21, 2026
The global economy is entering a more fragile period as geopolitical conflicts, rising energy costs, and financial instability threaten growth and trade — with a new UN report warning that the nature of the threat has fundamentally shifted.
According to a report released Tuesday by the UN Conference on Trade and Development (UNCTAD), the global economy remained resilient at the start of 2026, supported by trade, industrial production in developing countries, and investment linked to artificial intelligence. However, geopolitical tensions have increasingly replaced trade tensions as the main source of global instability since energy markets, financial conditions, and major shipping routes are now disrupted by conflict in the Middle East.
Growth Slows as Costs Rise
UNCTAD projects global growth will slow from 2.9% in 2025 to 2.6% in 2026, driven by higher oil prices, transport disruptions, market volatility, and weaker investment demand. World merchandise trade growth is expected to fall sharply from 4.7% in 2025 to between 1.5% and 2.5% in 2026 — roughly half last year’s pace.
“Geopolitical tensions have increasingly replaced trade tensions as the main source of global instability,” the report stated, noting that energy markets, financial conditions, and major shipping routes are now being disrupted directly by active conflict rather than by tariff schedules.
Developing economies face the greatest pressure, including rising fuel, food, and fertilizer costs, weaker currencies, and tighter financing conditions. The report also flags that recent trade growth has been concentrated heavily in AI-related products such as semiconductors and data-processing equipment, while broader trade activity remains weak.
Flash Appeal for Gaza Only 12% Funded
Aid operations in Gaza are being squeezed by severe funding shortfalls. The 2026 Flash Appeal seeking more than $4 billion to support nearly 3 million people across Gaza and the West Bank is only 12% funded, with just $490 million received so far.
The UN and its partners are supporting kitchens serving around 1 million meals per day in Gaza — down from 1.8 million in February. Agencies warn that one in five families is eating only once a day, with many mothers skipping meals so their children can eat.
UNMISS Head: South Sudan Returns Continue
In South Sudan, more than 304,000 people have been displaced in Jonglei state since conflict escalated in January, particularly in the counties of Uror, Nyirol, Ayod, Duk, and Akobo. Nearly 79,000 people have since returned to their areas of origin, including more than 44,000 returning from Ethiopia’s Gambella region.
Anita Kiki Gbeho, the newly appointed head of the UN Mission in South Sudan (UNMISS), said peacekeepers remain in Akobo as returns continue. The humanitarian situation across Jonglei remains acute, with basic services severely disrupted.
UNCTAD Recommendations
The UN agency called for stronger international cooperation, more predictable trade policies, and greater investment in renewable energy to reduce vulnerability to future global shocks. With shipping routes through the Suez Canal facing ongoing disruptions and oil markets exposed to Middle East volatility, the report argues that supply chain resilience can no longer be taken for granted.
The coming quarters will test whether AI-linked investment can sustain overall global trade volumes as traditional growth drivers weaken — a question the next UNCTAD update will begin to answer.
