World Bank Lowers 2026 Global Growth Forecast Amid US-Israeli War on Iran

The World Bank’s Global Economic Prospects report projects global GDP growth at 2.5 % for 2026, down from 2.9 % in 2025, the slowest pace since the COVID-19 pandemic. Growth in emerging market and developing economies (EMDEs) is forecast at 3.6 % for the year, and per-capita income in EMDEs is not expected to regain pre-pandemic levels until after 2028.

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The downgrade follows a U.S.–Israeli military campaign against Iran that has forced the closure of the Strait of Hormuz, a chokepoint handling roughly 30 % of global fertilizer and 20 % of oil shipments. The shutdown has lifted U.S. farm diesel prices by about 50 % and pushed fertilizer costs up 25-50 %, heightening food-price volatility.

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World Bank chief economist Indermit Gill warns that, barring a miracle, the 2020s could become a lost decade for dozens of low- and middle-income countries. Elevated commodity prices threaten food security, while tighter monetary conditions raise debt-service costs, potentially stalling reforms and deepening financial stress across EMDEs.

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President Ajay Banga said the Bank is ready to provide liquidity now and has pledged up to $100 billion in financing over the next 15 months for the most affected nations. Gill reiterated the financing commitment and emphasized the need to protect populations while preserving pathways to growth and jobs.

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The report notes that U.S. President Donald Trump and Israeli Prime Minister Benjamin Netanyahu have been accused of undermining diplomatic efforts to end the conflict, a stance that could prolong commodity disruptions and worsen the economic outlook.

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• “The global economy is facing another major shock,” — World Bank Global Economic Prospects report

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• “The conflict in the Middle East has triggered sharp increases in energy prices, renewed inflationary pressures, and fueled expectations of tighter monetary policy.” — World Bank Global Economic Prospects report

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• “Global growth is projected to slow to 2.5% in 2026, from 2.9% in 2025—the lowest rate since the Covid-19 pandemic—amid weaker prospects for economies dependent on energy imports and those directly affected by hostilities,” — World Bank Global Economic Prospects report

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• “In response to the current shock, we are providing liquidity where it is needed now—and we are ready with additional financing, guarantees, and private-sector solutions if pressures deepen.” — Ajay Banga, World Bank Group president

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The Bank cautions that any further escalation or prolonged blockage of commodity flows could deepen inflation, food insecurity, and financial stress. Activity is expected to firm in 2027-28 as energy supplies recover, but meaningful improvement for developing economies may not appear until the 2030s.

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