World Bank cuts global growth forecast to 2.5% as Middle East conflict triggers energy shock
New Delhi, June 13
The World Bank has lowered its global growth forecast for 2026 to 2.5 per cent, warning that the conflict in the Middle East has triggered a fresh shock to the global economy by disrupting energy markets, fuelling inflation and weakening growth prospects across much of the world.
In its latest 'Global Economic Prospects' report released in June 2026, the World Bank said, "The global economy is facing another major shock. The conflict in the Middle East has triggered sharp increases in energy prices, renewed inflationary pressures, and fueled expectations of tighter monetary policy."
The multilateral lender projected global growth to slow from 2.9 per cent in 2025 to 2.5 per cent in 2026, calling it "the lowest rate since the COVID-19 pandemic." It said the slowdown reflects weaker prospects for energy-importing economies and countries directly affected by the hostilities.
According to the report, the conflict has sharply altered the global outlook, with "about two-thirds of economies around the world facing weaker growth prospects."
The World Bank said disruptions to energy and commodity supplies from the Gulf region have led to a sharp rise in prices. "Overall, commodity prices are expected to rise by 22 percent in 2026, in contrast to the 7 percent decline expected in January," the report noted.
It added that the disruptions are expected to keep energy prices elevated, with "the Brent crude oil price averaging USD 94/barrel (bbl) in 2026, an increase of 36 percent over 2025 and more than 50 percent above the January projection." European natural gas prices are also projected to rise by about 30 per cent this year due to tighter global LNG availability.
The report said higher energy costs have reignited inflationary pressures globally. "The increase in commodity prices has led to a notable resurgence of inflationary pressures," it said, adding that headline inflation expectations have risen across both advanced and developing economies.
The World Bank warned that the economic fallout could worsen if the conflict escalates further. "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 report said.
In its downside scenario, the World Bank said global growth could slow dramatically. "If energy supply disruptions prove more severe than assumed and are accompanied by substantial financial stress, global growth could fall to just 1.3 per cent in 2026."
Despite the gloomy outlook, the report identified artificial intelligence (AI) as a potential source of stronger future growth. "On the upside, broader investment in and adoption of artificial intelligence (AI) could lift activity," it said.
— ANI
Reader Comments
The World Bank says AI could help growth. But first, we need to survive this energy shock. Middle East conflict is not new, but the scale of this impact is scary. Expect petrol prices to cross Rs 120 in Delhi soon. The government should think about strategic oil reserves and long-term contracts with Russia and other suppliers. Saaf-soothra plan chahiye abhi! 🇮🇳
I'm not convinced this will be as bad as they say. India's economy has shown resilience before. With GST collections rising and manufacturing picking up, we might weather this storm better than others. But yes, common man will feel the heat in fuel and food prices. Middle class soch raha hai ab budget kaise manage kare... 😕
The World Bank's downside scenario of 1.3% growth sounds like doomsday, but honestly, their past predictions haven't always been accurate. India is not just an energy importer but also a growing services hub. Our IT exports and remittances from NRIs in Gulf could be affected though. Need proactive diplomacy in West Asia right now.
This is going to hurt our poor the most - rising commodity prices mean higher food costs, transport costs, everything. The government should immediately expand free food grain distribution and DBT transfers. Also, why aren't we talking about ramping up domestic oil production? We have so much potential in KG basin and Rajasthan fields. 🤔
The silver lining is AI adoption mentioned by World Bank. India is already a
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