The World Bank issued a stark warning Thursday that the escalating US-Iran military confrontation is on track to shave nearly a full percentage point off global economic growth in 2026, pulling worldwide output to its lowest level since the COVID-19 pandemic contracting years.
In its mid-year Global Economic Prospects report, the Washington-based institution projected world GDP growth of 2.2 percent for 2026, down from an earlier forecast of 3.1 percent made before the Strait of Hormuz conflict intensified. The bank described the revision as among the sharpest single-cycle downward adjustments in its modern reporting history.
“We are witnessing a conflict with global spillovers at a scale we have not seen in decades,” said World Bank Chief Economist Priya Basu, presenting the findings in Washington. “The disruptions to energy markets, trade routes, and food supply chains will affect economies far beyond the immediate theater of conflict.”
The report singled out oil market turmoil as the primary transmission mechanism. With Hormuz effectively closed to commercial traffic following Iranian missile operations, crude prices have spiked above $150 per barrel on international markets, adding significant inflationary pressure across importing nations. The bank estimates that every $10 increase in oil prices trims 0.3 percentage points from growth in oil-importing developing economies.
The humanitarian consequences extend well beyond macroeconomics. The World Bank projects that food insecurity across the Middle East and North Africa will deepen significantly in the second half of 2026, with Yemen, Lebanon, and the Gaza Strip facing the most acute pressures. Lebanon’s economy, already fragile from years of political crisis, is projected to contract by 4.8 percent this year — a figure the bank called “deeply alarming.”
The institution called for an immediate international response coordinated through the United Nations and the International Monetary Fund, and appealed to all parties to prioritize civilian infrastructure protection. It also urged oil-producing states to increase output to stabilize global markets, though analysts note that political conditions make a coordinated supply response unlikely in the near term.
The report’s release coincided with fresh diplomatic efforts, as Qatar and Egypt continued shuttle mediation between Washington and Tehran through back-channel contacts facilitated by the UN special envoy’s office. World Bank officials said they would revise their projections upward “significantly and quickly” if a ceasefire took hold, citing historical precedent from the 1991 Gulf War recovery period as a model.
Layla Hassan
Layla Hassan covers Middle East politics, conflict, and diplomacy from the Gulf to the Levant.