The global economy is facing its most significant slowdown since the COVID-19 pandemic, according to the World Bank Group's latest Global Economic Prospects report released on June 11, 2026. Global growth is forecast to decelerate to 2.5 percent in 2026, down from 2.9 percent in 2025, as the conflict in the Middle East sends energy prices soaring and inflation higher across both advanced and developing economies.
The closure of the Strait of Hormuz — which handles approximately 35 percent of global seaborne crude oil trade — has severely disrupted energy markets. Brent crude oil prices are projected to average $94 per barrel in 2026, representing a 36 percent increase above 2025 levels, under the assumption that the most acute disruptions abate in July. Global inflation is expected to climb to 4.0 percent this year, up substantially from 3.3 percent in 2025, squeezing household purchasing power worldwide.
Developing economies are bearing the brunt of the shock. Growth in these nations is expected to drop to a post-pandemic low of 3.6 percent in 2026, down from 4.4 percent in 2025. Gulf economies directly affected by the conflict face the most severe contraction, with their collective growth tumbling from 3.9 percent in 2025 to near zero in 2026. The World Bank report warns that if energy supply disruptions prove more severe than currently assumed, global growth could fall as low as 1.3 percent in 2026, with inflation rising to 4.4 percent.
Regional disparities remain stark. South Asia is expected to post the strongest growth at 6.3 percent in 2026, though this still marks a notable slowdown from 7.0 percent in 2025. East Asia and the Pacific is forecast at 4.2 percent, Sub-Saharan Africa at 4.0 percent, Latin America and the Caribbean at 2.2 percent, and Europe and Central Asia at 2.1 percent. The Middle East, North Africa, Afghanistan, and Pakistan region is projected to grow just 1.6 percent before recovering to 5.0 percent in 2027 as reconstruction activity begins.
The World Bank Group's earlier Commodity Markets Outlook from April 2026 had already flagged the magnitude of the commodity price shock. Overall commodity prices were forecast to rise by 16 percent in 2026, with energy prices surging 24 percent and fertilizer prices climbing 31 percent. Base metals — including aluminum, copper, and tin — were projected to reach all-time highs, while precious metals were forecast to increase 42 percent amid geopolitical uncertainty driving demand for safe-haven assets.
Fiscal vulnerabilities compound the challenge. Aggregate government debt in developing economies has climbed from under 40 percent of GDP in 2010 to over 70 percent today, the report finds. Rising debt levels are constraining countries' ability to respond to crises while simultaneously driving up borrowing costs. Approximately two-thirds of developing economies — and nearly 90 percent of low-income countries — are commodity exporters, yet these economies tend to have weaker fiscal positions due to volatile and less diversified revenue streams.
In response to the crisis, the World Bank Group announced it is immediately making up to $50–60 billion available through existing instruments, including $25 billion in pre-arranged financing. If the conflict and its economic fallout persist, support could scale to $80–100 billion over 15 months. Over 30 countries are actively working with the World Bank Group to enhance readiness under this response framework.
Sources: World Bank Global Economic Prospects June 2026 | World Bank Commodity Markets Outlook April 2026
