Full Breakdown
Impact of Middle East Conflict on Global Trade Outlook
3/19/2026, 8:48:51 PM
Deteriorating Trade Projections
The World Trade Organization (WTO) has revised its forecast for global merchandise trade growth, projecting an increase of only 1.9% in 2026, a significant decline from 4.6% in 2025. This downturn is attributed to the ongoing conflict in the Middle East, which has led to elevated energy prices and disruptions in critical supply chains, particularly through the Strait of Hormuz. The WTO indicated that if high prices for crude oil and liquefied natural gas persist, trade growth could further diminish to as low as 1.4%.
Energy Price Pressures and Supply Chain Disruptions
The conflict, particularly the late-February attacks by the U.S. and Israel on Iran, has resulted in notable disruptions in energy production and transportation. As a vital passage for global trade, the Strait of Hormuz has seen significant interruptions, affecting fertilizer shipments and raising concerns about food security. Major agricultural economies such as India, Thailand, and Brazil, which rely heavily on urea imports from the Gulf, are particularly vulnerable to these supply chain challenges.
Resilience Amidst Challenges
Despite these pressures, the WTO noted that global trade has shown resilience, largely due to a surge in demand for artificial intelligence (AI)-related goods. In 2025, trade in AI-enabling products accounted for 42% of global trade growth, with a year-on-year increase of 21.9% to approximately $4.18 trillion. WTO Director-General Ngozi Okonjo-Iweala emphasized that while the outlook remains pressured by geopolitical tensions, the strength of high-technology products and digitally delivered services has provided a buffer against the adverse effects of the conflict.
Criticism and Concerns
Critics have raised concerns regarding the sustainability of the AI-driven trade boom, questioning whether investment in this sector can continue to offset the mounting geopolitical risks. The WTO's report highlights that the negative impact of tariffs in the previous year was less severe than anticipated, but ongoing tensions could lead to deeper structural shifts in trade routes and supply chains.
Official Statements and Responses
In her statement, Ngozi Okonjo-Iweala remarked, “The outlook reflects the resilience of global trade, buoyed by high-technology products and digitally delivered services. However, this baseline forecast is under pressure from the conflict in the Middle East.” She further warned that sustained increases in energy prices could have spillover effects on food security and consumer costs.
What's Next?
Looking ahead, the WTO suggests that if geopolitical tensions ease and investment in AI continues, merchandise trade growth could potentially increase by 0.5 percentage points, reaching up to 2.4% in 2026. However, the organization cautions that the trajectory of global trade will largely depend on the resolution of the Middle East conflict and the continued strength of AI-related investments.
