The World Bank has issued a stark warning that the ongoing conflict between the US and Iran could drive global economic growth to its lowest point since the COVID-19 pandemic. The institution has revised its growth forecast for 2026 down to 2.5%, a significant drop from earlier predictions. This decline is attributed to surging energy prices, inflation, and increased borrowing costs, all exacerbated by the geopolitical tensions in the Middle East.
One of the most pressing concerns is the potential closure of the Strait of Hormuz, a crucial passage for oil and gas shipments. Such a closure could lead to further disruptions in energy supplies, pushing Brent crude prices to an average of $94 per barrel this year. This spike in energy costs is expected to have a cascading effect on global inflation, which could rise to 4% in 2023, impacting household budgets and increasing the cost of living.
The World Bank’s report highlights that developing countries are particularly vulnerable to these economic shocks. With two-thirds of countries seeing downgraded growth forecasts, the disparity in income between developing nations and wealthier countries is likely to widen. The institution has pledged up to $60 billion in support for those affected, with the possibility of increasing this to $100 billion if the conflict continues.
As the situation unfolds, the implications for everyday life are profound. Rising costs for essentials like food and energy could strain household finances, while job stability may be threatened in sectors reliant on stable global trade. The interconnectedness of the global economy means that the repercussions of this conflict will be felt far beyond the immediate region, affecting lives and livelihoods worldwide.
Source: Al Jazeera
