US-Iran war to pull global economy to post-COVID low: World Bank

What Happened

On Thursday, the World Bank published its Global Economic Prospects report, warning that the ongoing US-Iran war is set to slow global economic growth to its lowest since the COVID-19 pandemic. The institution cut its 2026 global growth forecast by 0.4 percentage points to 2.5 percent, down from 2.9 percent predicted in January, citing surging energy prices, rising inflation, and higher borrowing costs. The report attributes these disruptions to Iran's closure of the Strait of Hormuz—a vital oil and gas passage—in response to hostilities launched by the United States and Israel. The World Bank estimates Brent crude prices will average $94 per barrel this year, 36 percent above last year's average, and that global inflation will climb to 4 percent from 3.3 percent. It warns that growth could plummet to 1.3 percent with inflation at 4.4 percent if supply shocks intensify, and notes that developing countries are especially vulnerable. World Bank President Ajay Banga stated the institution has set aside up to $60 billion to assist affected nations, with the capacity to increase support to $100 billion if the conflict persists.

Key Actors

Why It Matters

The US-Iran conflict's disruption of the Strait of Hormuz—a critical chokepoint for global oil and gas transit—is fueling energy price spikes, inflationary pressure, and slowing growth worldwide, with developing nations bearing the brunt. The World Bank's downgrade underscores how geopolitical instability in the Middle East directly imperils the post-pandemic economic recovery and widens the income gap between wealthy and poorer countries, threatening to reverse decades of development progress.

Watch For

Monitor the durability of the US-Iran ceasefire, as the World Bank warns that a breakdown could worsen supply disruptions and push global growth down to 1.3 percent with inflation at 4.4 percent. Track any developments regarding the Strait of Hormuz's operational status, fluctuations in Brent crude prices, and the World Bank's actual disbursement of its pledged $60–100 billion in support to affected developing economies.