The World Bank expects global growth to slow to 2.5% in 2026 from 2.9% in 2025, with forecasts for nearly two-thirds of economies downgraded since January. While growth is projected to recover modestly to 2.8% in 2027, it will remain well below the average pace recorded during the 2010s.
The report points to severe disruptions in energy markets following the closure of the Strait of Hormuz, a key global oil shipping route. Brent crude oil prices are expected to average $94 per barrel this year, about 36% higher than in 2025, assuming supply disruptions ease by July.
The surge in energy costs is also expected to push up fertiliser prices, adding pressure on food inflation globally. As a result, global inflation is forecast to rise to 4% in 2026, up from 3.3% a year earlier.
“The impact differs by country, but the basic test is the same: protect people and preserve stability today, without giving up on growth and jobs tomorrow,” World Bank Group President Ajay Banga said.
The World Bank warned that risks remain heavily tilted to the downside. If energy supply disruptions become more severe and trigger broader financial stress, global growth could slow sharply to just 1.3% in 2026, while inflation could climb to 4.4%.
Developing economies are expected to bear a significant share of the pain. Growth across emerging and developing economies is projected to fall to 3.6% in 2026 from 4.4% in 2025, marking the weakest performance since the pandemic period.
Among the worst-hit regions are the Gulf economies directly affected by the conflict. Their growth is forecast to tumble from 3.9% in 2025 to near zero in 2026 before rebounding in 2027 and 2028 as trade normalises and reconstruction activity gathers pace.
South Asia is expected to remain the fastest-growing region globally, although growth there is also projected to slow to 6.3% in 2026 from 7% in 2025.
The report highlighted a growing divergence between advanced and developing economies. Excluding China and India, developing economies are on track to complete nearly a decade without narrowing the per-capita income gap with advanced economies.
To help countries cope with the fallout, the World Bank said it is immediately making up to $50-60 billion available through existing financing instruments, including $25 billion in pre-arranged funding. The support is aimed at strengthening social safety nets, boosting government finances and providing liquidity support to businesses and farmers.
The institution said more than 30 countries are already working with the World Bank to strengthen crisis preparedness and response mechanisms. If economic conditions deteriorate further, the World Bank said it is prepared to scale up support to as much as $80-100 billion over the next 15 months.
The report also flagged rising debt burdens as a growing concern for developing economies. Aggregate government debt in developing countries has risen from less than 40% of GDP in 2010 to more than 70% currently, limiting governments’ ability to respond to shocks and increasing borrowing costs.
World Bank Deputy Chief Economist Ayhan Kose said the crisis should also serve as an opportunity for countries to strengthen economic resilience through reforms, infrastructure investment and policies that encourage private-sector-led job creation.
“The conflict has taken a toll on global activity, but every crisis also brings an opportunity,” Kose said. “This moment should be used to strengthen policy frameworks, invest in infrastructure, accelerate business-enabling reforms and mobilise private capital to support job creation at scale.”