World Bank cuts 2026 global growth forecast to 2.5% as war fallout spreads

The World Bank has cut its 2026 global growth forecast to 2.5%, saying the outlook is now the weakest since the COVID-19 pandemic and that two-thirds of countries are facing downgrades.

The new forecast underscores how a conflict in the Middle East is feeding into the wider world economy. The bank said fallout from the Iran war is raising energy costs, adding uncertainty and weakening growth across advanced and developing economies alike.

AP first reported the revised forecast on June 10, with later coverage on June 11 confirming the same numbers and the breadth of the downgrade. The World Bank's latest Global Economic Prospects outlook is now the central news peg for the slowdown warning.

What the World Bank is saying

The World Bank left its U.S. growth forecast unchanged at 2.2%, AP reported, but lowered its outlook for developing and emerging markets to 3.6%. It sees China growing 4.2%, India 6.6% and the euro area 0.8%.

That mix shows how widely the slowdown is spreading. Even where the bank did not make a fresh downgrade, the overall picture is one of weaker momentum, tighter financial conditions and less room for countries to absorb new shocks.

The bank's chief concern is the transmission from conflict to commodity prices. Higher oil and transport costs can filter quickly into inflation, while uncertainty can delay investment and make borrowing more expensive.

The Guardian reported that the World Bank expects global inflation to rise to 4% in 2026, up from 3.3% in 2025. It also said average fertilizer prices could jump by as much as 38% this year if supply disruption continues through the Strait of Hormuz.

That matters well beyond energy markets. Fertilizer is a key input for farming, so higher prices can eventually feed into food costs, adding pressure on households and governments already dealing with weak growth.

Risks for developing countries

The World Bank's warning is especially significant for lower-income and emerging economies. Weaker global growth can reduce export demand, tighten borrowing conditions and leave governments with less fiscal room to respond to shocks.

The report said a renewed escalation or longer disruption could push global growth as low as 1.3%. That downside scenario would increase the strain on countries that rely on imports of fuel, food or fertilizer.

World Bank president Ajay Banga said the institution is providing liquidity now and is ready with additional financing, guarantees and private-sector solutions if pressures deepen, according to The Guardian. That response suggests the bank sees the risk as not just cyclical, but potentially destabilizing for vulnerable economies.

The latest outlook adds to a growing list of pressures on the global economy: higher energy prices, lingering inflation concerns, and uncertainty around how long the conflict and its market effects will last. For now, the World Bank's message is clear: the world economy is slowing, and the shock is already broad-based.