The global economy is experiencing a slowdown as increased energy prices spur new inflationary pressures. Recent events in the Middle East have impacted growth significantly, according to a World Bank report released on Thursday.
The conflict initiated by U.S.-Israeli airstrikes on Iran in February has disrupted supply chains, particularly in the Strait of Hormuz. This has led to fluctuations in the prices of oil, gas, and fertilizers, contributing to global inflation.
The World Bank has revised its growth forecast, now predicting a decline to 2.5% growth in 2026, down from 2.9% in 2025. Should the conflict intensify and supply chain disruptions extend, growth could decrease further to 1.3%.
Escalation seemed imminent on Thursday, following President Trump’s warnings of further military actions targeting Iranian energy infrastructure. He indicated potential control of Iran’s oil and gas markets, comparing it to actions taken in Venezuela.
Inflation, persistent over the last four years, is set to rise again due to the conflict. The World Bank anticipates an elevation in global inflation to 4% in 2026, driven by a 22% increase in commodity prices, contradicting earlier expectations of a decline.
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