World Bank Raises Alarm Over Iran War and Possible Closure of Strait of Hormuz

Islamabad (Kudrat Daily) — The World Bank has warned that rising energy prices and inflationary pressures triggered by the Iran conflict could pose serious risks to the global economy.

According to the World Bank’s Global Economic Prospects 2026 report, global economic growth is projected to slow to 2.5%, marking one of the lowest post-pandemic growth rates. The report noted that last year the growth rate stood at 2.9%, while average global inflation is expected to remain around 4% in 2026.

The report further highlighted that the ongoing conflict involving Iran, the United States, and Israel has created significant instability in global energy markets, leading to sharp increases in oil and gas prices.

It stated that rising energy costs are fueling inflation worldwide. In response, central banks may be forced to increase interest rates, which could raise borrowing costs and slow down overall economic activity.

The World Bank also warned that developing countries are likely to be the most affected by the crisis. It announced that up to $60 billion in financial assistance is being provided to support vulnerable economies dealing with high fuel, gas, and electricity prices as well as inflation.

The report added that this support could be increased to $100 billion over the next 15 months to help weaker economies cope with ongoing economic pressures.

Economic experts cautioned that if tensions in the Middle East escalate further, global trade, investment flows, and energy supply chains could face additional disruptions, potentially slowing global growth even further.