The ongoing conflict in the Middle East is impacting global economic growth, causing a slowdown comparable to the period during the Covid-19 pandemic. A World Bank report published recently highlights the consequences of rising energy costs.
The U.S.-Israeli attack on Iran in late February disrupted cargo flow through the Strait of Hormuz. This disruption has led to fluctuating prices for oil, gas, and fertilizers for months now, contributing to a fresh wave of inflation. This inflation is pushing expectations for interest rate hikes and reduced output worldwide.
According to the World Bank’s revised forecast, global output growth is expected to slow to 2.5 percent in 2026 compared to 2.9 percent in 2025. The report warns that, should the conflict intensify and disruptions continue, growth could diminish to just 1.3 percent.
Escalation in the conflict seemed likely as of Thursday, with President Trump suggesting more attacks on Iran and plans to control its energy assets. He stated, “At some point in the near future, we will be taking Kharg Island and other oil infrastructure points, and assume total control of their Oil and Gas Markets, similar to our actions with Venezuela.”
The war adds pressure to already high inflation, increasing prices once more. World Bank projections show global inflation rising to 4 percent in 2026, up from 3.3 percent the previous year. This increase is notably driven by a 22 percent hike in commodity prices, contrary to earlier expectations for a decline at the beginning of the year.