The war in Iran hits global growth hard

The growth world falls to lowest level since pandemic

The growth The global economy is preparing to experience its weakest pace since the Covid-19 pandemic. In its Global Economic Prospects report published Thursday, the World Bank drastically revises its forecasts downwards, now establishing the increase in global GDP at 2.5% for 2026, compared to 2.9% anticipated last January. A deterioration directly attributable to the conflict between the United States and IsraelIran since the end of February.

The Washington institution is sounding the alarm about the economic consequences of Tehran’s blockade of the Strait of Hormuz. The strategic passage, through which a fifth of the world’s oil and natural gas supplies pass, has remained closed since the start of hostilities. Brent prices should therefore rise to $94 per barrel on average in 2026, an increase of 36% compared to 2025.

Two thirds of global economies affected

The shock wave is spreading well beyond the Middle East. There World Bank has revised downwards its projections for two-thirds of national economies since January. LDeveloping countries are suffering the most severe blow, with growth expected at 3.6% in 2026 compared to 4.4% in 2025, marking their weakest performance since the health crisis.

The Gulf economies are suffering the most brutal impact. Their economic growth is expected to collapse from 4.5% last year to just 1.3% in 2026, before an anticipated rebound to 5% the following year with the expected resumption of energy flows and reconstruction work. The euro zone is not escaping the turbulence, with growth reduced to 0.9% compared to 1.1% initially forecast. China also sees its outlook darkening, going from 4.4% to 4.2%.

The return of inflation constrains central banks

Inflationary tensions are rekindling at the same time. The World Bank forecasts global inflation of 4% in 2026, a significant increase compared to 3.3% in 2025. The prices of fertilizers, oil derivatives essential to agriculture, are experiencing a particularly worrying surge with increases of up to 38%.

Faced with the resurgence of inflation, central banks are toughening their posture. The European Central Bank raised its key rates by 25 basis points on Thursday, bringing them from 2% to 2.25%. “The main risk would be not to make this kind of decision,” justified Christine Lagarde, fearing an uncontrollable slide in prices. Brent oil is expected to reach $94 per barrel on average, while global inflation rises to 4% in 2026.

A catastrophe scenario: 1.3% growth in 2026

The Washingtonian institution does not rule out further deterioration. In the event of worsening energy disruptions accompanied by major financial tensions, global growth could collapse to just 1.3%, while inflation would jump to 4.4%.

“A renewed escalation of hostilities or more prolonged disruptions to commodity flows could further drive up commodity prices, intensify inflationary pressures and food insecurity,” the report warns. Ayhan Kose, deputy chief economist, highlights how quickly “the outlook could deteriorate if energy and financial pressures reinforce each other.”

“A lost decade” for developing countries

Beyond the economic turbulence, the World Bank points out the structural challenges which undermine long-term prospects. Nearly half of developing economies “have failed, since 2019, to progress towards the most basic promise of development: reducing the income gap with the most prosperous economies”, deplores the institution.

Growing debt aggravates the situation. Since 2010, overall public debt in emerging countries has climbed from less than 40% of GDP to more than 70%. The more a state is already in debt, the more the borrowing costs of additional debt soar, creating a particularly worrying vicious circle. The Iranian conflict, by disrupting energy supply chains, is a reminder of the vulnerability of economies to geopolitical tensions in the Middle East.

Three recovery levers for the global economy

Despite the gloomy outlook, three avenues could revitalize the growth worldwide. Artificial intelligence represents the first lever of hope. Its rapid adoption “could push global productivity rates beyond the meager average of the 2020s,” said Indermit Gill, chief economist of the World Bank. Well managed, it could usher in “the most prosperous decade in the world since the 1970s”.

The energy transition constitutes the second axis of development. Clean energy is becoming as much “a national security imperative as a priority for global development”, creating job opportunities and access to affordable energy for emerging countries. The current conflict, by revealing the dependence on hydrocarbons from the Gulf, could accelerate the energy diversification of the great powers.

The intensification of regional trade, driven by the multiplication of bilateral agreements, “brings developing economies closer to each other and brings predictability thanks to clear rules”. A phenomenon which could partially compensate for the disruptions in world trade caused by current geopolitical tensions.

Faced with multiple challenges, the World Bank is mobilizing exceptional resources. The institution has already set aside 100 billion dollars over the next fifteen months to support the countries most affected by the fallout from the Middle East conflict. “We are ready with additional financing, guarantees and private sector solutions if the pressures deepen,” assures Ajay Banga, president of the World Bank Group.