World Bank: Iran War Could Push Global Growth to Near Stagnation

By Staff, Agencies 

CNN reported that the World Bank has warned that the ongoing war on Iran is increasingly weighing on the global economy, with disruptions to energy and commodity markets threatening to slow growth, intensify inflation, and place additional strain on vulnerable developing countries.

In its latest economic outlook released on Thursday, the institution forecast global growth of 2.5% in 2026, down from 2.9% in 2025, citing the war and its impact on trade and commodity flows among the principal risks facing the world economy.

The assessment comes weeks after internal World Bank documents revealed that 27 developing countries had begun activating crisis-response financing mechanisms to cope with the economic fallout of the war. Governments in countries such as Kenya and Iraq have already sought rapid support as rising fuel costs, volatile commodity prices, and declining revenues place growing pressure on public finances.

The World Bank warned that further deterioration in the security situation could amplify these challenges across the global economy.

“A renewed escalation of hostilities or more prolonged disruptions to commodity flows could further raise commodity prices, intensify inflationary pressures and food insecurity, trigger financial stress, and lower growth,” the Bank said in its latest assessment. 

Since the outbreak of the war, energy and fertilizer markets have experienced significant volatility, while shipping through the Strait of Hormuz has remained severely disrupted. The World Bank noted that sustained interruptions to commodity flows have already contributed to higher prices for oil, natural gas, and fertilizers, increasing costs for both consumers and governments worldwide.

While the World Bank's baseline forecast points to slower but continued global expansion, it cautioned that a deeper shock to energy markets could produce far more severe consequences.

“If energy supply disruptions prove more severe than assumed and are accompanied by substantial financial stress, global growth could fall to just 1.3% in 2026,” the World Bank added.
Such a scenario would bring the world economy close to stagnation and mark one of its weakest performances since the COVID-19 pandemic.

The report's findings reinforce concerns raised by World Bank President Ajay Banga earlier this year, when he said the institution's crisis-response framework could provide between $20 billion and $25 billion in rapid financing to countries affected by the war, with potential support rising to approximately $60 billion through restructured lending programs.

Developing economies remain particularly exposed to the crisis. The World Bank expects growth across the developing world to weaken this year compared with 2025, as many countries continue to grapple with the lingering effects of the pandemic, elevated borrowing costs, and external economic shocks linked to the conflict.

Outside China and India, per capita income levels across developing economies are not expected to return to their pre-pandemic trajectory until after 2028, underscoring the long-lasting economic consequences that the war and broader global instability may have on millions of people across the developing world.