World Bank cuts 2026 growth forecast as Strait of Hormuz closure raises energy shock fears

The World Bank has cut its forecast for global growth in 2026 after warning that the conflict involving the United States, Iran and Israel is putting pressure on energy markets and supply chains. In its latest Global Economic Prospects report, the Washington-based institution said Iran's closure of the Strait of Hormuz has added to the risk of a wider economic slowdown. The report said the strategic waterway, a key route for oil and gas transit, is under strain as a fragile ceasefire between the United States and Iran is tested.

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The bank lowered its 2026 global growth forecast to 2.5% from 2.9% in January. It said the downgrade reflected surging energy prices, rising inflation and higher borrowing costs. The report also warned that the outlook could worsen if supply disruptions deepen.

It said Brent crude could average $94 a barrel this year, which would be 36% above last year's average. The analysis said the closure of the Strait of Hormuz could push global inflation to 4% this year, up from 3.3% last year. It added that fertiliser prices are expected to rise significantly, with possible knock-on effects for food prices.

In a more severe scenario, the bank said global growth could fall to 1.3% this year if energy supply disruptions worsen, while inflation could rise to 4.4%. The warning matters because the Strait of Hormuz is one of the world's most important energy chokepoints. Any disruption there can affect oil and gas shipments well beyond the Middle East, with consequences for transport costs, food prices and borrowing conditions.

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The bank said developing countries are likely to be among the most exposed, and it has downgraded growth forecasts for two-thirds of countries since January. The report places the current shock in a broader pattern of weak global growth. It said world growth is expected to improve to 2.8% in 2027, but remain below the average seen in the 2010s.

Excluding China and India, it said developing countries have made little progress over the past decade in narrowing the income gap with wealthier economies. That adds to concern that a prolonged energy disruption could deepen existing economic pressures in poorer states. What remains unclear is how long the Strait of Hormuz closure will last and whether the ceasefire between the United States and Iran can hold.

The World Bank's figures are forecasts, not confirmed outcomes, and they depend on how far energy flows are disrupted. The key issue to watch is whether the conflict eases enough to stabilise oil markets or whether further escalation forces another downgrade.

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