The World Bank has downgraded its global economic growth forecast for 2026, citing escalating tensions between the United States and Iran. The conflict. Which began when the U.S. joined Israel in attacking Iran on February 28, has led to the closure of the Strait of Hormuz, a vital energy transit route. This has caused significant disruptions to global supply chains and energy markets.

Energy Prices and Inflation Rise

According to the World Bank. The price of Brent crude is expected to average $94 a barrel in 2026, a 36 percent increase from 2025 levels. This sharp rise in energy prices is pushing global inflation to an estimated 4 percent this year, up from 3.3 percent in 2025, but In a worst-case scenario, if supply disruptions worsen, global inflation could climb to 4.4 percent and economic growth could fall as low as 1.3 percent.

Fertiliser prices are also projected to rise significantly in 2026, with potential knock-on effects on food prices globally — Ajay Banga, president of the World Bank Group, noted that developing countries are on the front line of these impacts.

Uneven Impact on Global Economies

The U.S. ., as a major energy producer, is expected to remain relatively insulated from the worst effects of the conflict, and the World Bank still forecasts 2.2 percent growth for the U.S. in 2026, unchanged from its January forecast. This resilience is attributed to tax cuts and growing investment in artificial intelligence — However, Americans are still experiencing the effects of higher energy prices, particularly at the gas pump.

Other economies, especially in developing and emerging markets, are being hit harder. The World Bank has cut its 2026 growth forecast for these countries by 0.4 percentage points to 3.6 percent, the lowest level since the post-pandemic recovery period. The institution noted that energy supply disruptions and sharply higher energy prices have dampened confidence and weakened broader economic activity in these regions.

China, the world’s second-largest economy, is expected to grow by 4.2 percent in 2026, down from a previously forecast 4.4 percent and 5 percent in 2025. India, meanwhile, is projected to remain the fastest-growing major economy at 6.6 percent, although this is a significant drop from its 7.7 percent growth in 2025.

Long-Term Outlook Remains Dismal

Global growth is expected to improve to 2.8 percent by 2027, but this is still 0.4 percentage points below the average growth during the 2010s. The World Bank also highlighted that. Outside of China and India, developing countries have made little progress in narrowing their per capita income gap with wealthier nations over the past decade.

The institution has downgraded its growth forecasts for two-thirds of countries since January, reflecting the broader global economic instability caused by the conflict. The report shows the vulnerability of developing nations, which have faced a series of challenges over the last decade, including the pandemic, climate shocks, and rising debt burdens.

The European Union is also expected to see slower growth, with the 21 eurozone countries projected to grow by only 0.8 percent in 2026, down from 1.4 percent in 2025.