The global economy is heading into a more fragile phase as rising geopolitical tensions in the Middle East threaten to disrupt energy supplies, push up prices, and slow growth across both advanced and developing economies.
In its latest Global Economic Prospects report, the World Bank said it could mobilise as much as $100bn in financial support over the next 15 months to help developing countries manage the economic fallout from escalating conflict risks and market instability.
The institution warned that global growth may weaken to levels not seen since the COVID-19 pandemic, with higher energy costs, persistent inflation, and tighter financial conditions weighing heavily on economic activity worldwide.
According to the report, global growth is projected to slow to 2.5 per cent in 2026, down from 2.9 per cent in 2025, with roughly two-thirds of countries experiencing downward revisions compared to earlier forecasts. A modest recovery to 2.8 per cent in 2027 is expected, although this would still remain below the long-term average seen in the 2010s.
The World Bank said immediate support of between $50bn and $60bn is already being activated through existing financial instruments, including about $25bn in pre-arranged funding. These resources are intended to strengthen social protection systems, stabilise government finances, and provide emergency liquidity to businesses and agricultural sectors affected by the crisis.
“To date, over 30 countries are actively working with the World Bank Group to enhance readiness and enable a rapid response to the crisis under this response plan. If the conflict and its economic fallout persist, the World Bank Group can scale up its support to $80–100bn over 15 months,” the lender stated.
A key concern highlighted in the report is the disruption of global energy flows, particularly through strategic shipping routes such as the Strait of Hormuz. The Bank warned that any sustained disruption could keep oil prices elevated, with Brent crude projected to average around $94 per barrel in 2026, significantly higher than current levels.
Higher energy and fertiliser costs are also expected to feed into global food inflation, pushing average inflation to around 4 per cent this year, compared to 3.3 per cent in 2025. This would further strain household incomes, especially in import-dependent developing economies.
World Bank Group President Ajay Banga stressed that governments must balance immediate crisis response with long-term stability and job creation.
“The impact differs by country, but the basic test is the same: protect people and preserve stability today, without giving up on growth and jobs tomorrow,” he said.
“In response to the current shock, we are providing liquidity where it is needed now, and we are ready with additional financing, guarantees and private-sector solutions if pressures deepen.”
The report also outlined severe downside risks. In a worst-case scenario involving deeper energy disruptions and financial stress, global growth could fall further to 1.3 per cent in 2026, while inflation could rise to 4.4 per cent.
Developing economies are expected to bear much of the pressure, with growth slowing to 3.6 per cent in 2026 from 4.4 per cent in 2025, before gradually recovering in subsequent years. The Gulf region is projected to experience a sharp slowdown, while Sub-Saharan Africa faces rising inflationary pressures driven by food and fertiliser costs.
The World Bank’s Deputy Chief Economist and Director of the Prospects Group, Ayhan Kose, said the crisis should also prompt structural reforms across developing economies.
“The conflict has taken a toll on global activity, but every crisis also brings an opportunity,” he noted.
“This moment should be used to strengthen policy frameworks, invest in infrastructure, accelerate business-enabling reforms and mobilise private capital to support job creation at scale.”
Beyond immediate risks, the report flagged a longer-term concern: rising debt burdens across developing countries. Aggregate public debt has climbed from under 40 per cent of GDP in 2010 to more than 70 per cent today, limiting fiscal space for governments to respond to shocks and invest in essential services such as healthcare, education, and infrastructure.
As global uncertainty deepens, the World Bank’s message is clear: without coordinated intervention and structural reforms, the combined pressures of conflict, inflation, and debt could leave the global economy operating on a permanently weaker growth path.