The global economy is experiencing a slowdown as energy prices rise, leading to increased inflation. According to a World Bank report released on Thursday, the ongoing Middle East conflict is causing the weakest economic growth since the Covid-19 pandemic.
The conflict began with a U.S.-Israeli attack on Iran in late February. This has disrupted cargo traffic through the Strait of Hormuz, causing instability in oil, gas, and fertilizer prices for several months. The interference with global supply chains has sparked a fresh wave of inflation, raising the likelihood of higher interest rates and decreased global output.
The World Bank has revised its growth forecast, predicting a slowdown to 2.5% in 2026 from a 2.9% growth rate in 2025. It also suggests that if the conflict persists with extended supply disruptions, growth might drop to 1.3%.
The situation seemed to escalate further when President Trump proposed additional attacks on Iran and potential control of its energy facilities. He indicated plans to take over Kharg Island and other oil infrastructure, aiming for complete control of Iran’s oil and gas markets.
After four years of continuous inflation, the conflict is driving prices upward once more. The World Bank anticipates global inflation to reach 4% in 2026, up from 3.3% in the previous year. This rise is primarily prompted by a 22% increase in commodity prices, countering earlier predictions of a decline.