The ongoing conflict in the Middle East is expected to deliver a measurable blow to global economic growth, even if a ceasefire holds, according to the president of the World Bank, World Bank.
In an interview with Reuters, World Bank chief Ajay Banga said the war is already feeding through into weaker global expansion, with the effects likely to be felt across both advanced and developing economies through higher energy costs, disrupted trade routes and heightened investor uncertainty.
Banga warned that under a baseline scenario in which a ceasefire — reportedly announced by US President Donald Trump — takes hold and prevents further escalation, global growth could still be reduced by between 0.3 and 0.4 percentage points. He said financial markets were increasingly sensitive to geopolitical shocks, and that the conflict was already contributing to a more fragile outlook for the world economy.
“If the situation stabilises, the damage is contained but not avoided,” Banga indicated, according to the Reuters interview. “The ripple effects are already in motion.”
The World Bank’s assessment underscores the extent to which geopolitical instability has become a central driver of macroeconomic risk, at a time when the global economy is still adjusting to high interest rates, uneven post-pandemic recovery and persistent debt pressures in many low-income countries.
The risks escalate sharply in a prolonged conflict scenario. According to the World Bank’s modelling, sustained hostilities could cut global growth by as much as one percentage point, a significant downgrade that would likely reverberate through global supply chains, commodity markets and capital flows.
Emerging markets and developing economies are expected to bear the brunt of the slowdown. The World Bank now projects growth for these economies at 3.65% in 2026, down from a previous forecast of 4% made in October. Under a more adverse scenario, that figure could fall further to 2.6%, raising concerns about stalled development progress in some of the world’s most vulnerable regions.
Inflation is also expected to worsen as a consequence of the conflict, particularly in economies dependent on imported fuel and food. The World Bank now forecasts inflation in emerging and developing economies at 4.9% in 2026, up from an earlier estimate of 3%. In a severe downside scenario, inflation could surge to 6.7%, driven by supply disruptions and higher global energy prices.
Analysts say the projections reflect how quickly regional conflicts can transmit into global macroeconomic shocks. Oil and gas markets remain especially sensitive, given the Middle East’s central role in global energy supply chains. Any escalation risks pushing up shipping costs, insurance premiums and commodity prices, with knock-on effects for household budgets worldwide.
Banga cautioned that while a ceasefire could limit further deterioration, it would not immediately unwind the economic damage already embedded in markets. “The impact is not linear,” he suggested, noting that confidence effects often persist even after geopolitical tensions ease.
The World Bank chief’s comments come amid growing concern among policymakers that the global economy is entering a period of heightened volatility, where conflicts, climate shocks and trade fragmentation increasingly intersect.
Economists also warn that prolonged uncertainty could deter investment in developing economies at a time when financing needs are rising, particularly for infrastructure, climate adaptation and energy transition projects.
With global growth already subdued by historical standards, the World Bank’s warning adds to pressure on governments and central banks to prepare for further downside risks, even in the event that the Middle East conflict is contained in the near term.
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