WASHINGTON, 15 June. - (ANA) - The global economy is this year set to expand at its lowest rate since the Covid-19 pandemic, with nearly zero growth forecast for Gulf nations as a result of the Iran war, the latest World Bank report has found.

 

Global growth is forecast to slow to 2.5 per cent in 2026 from 2.9 per cent the previous year, with economic projections for two thirds of economies downgraded from January's forecast. Growth is expected to rebound to 2.8 per cent next year but will remain 0.4 percentage points below the average rate of the 2010s.

 

Gulf economies directly affected by the conflict are expected to take the biggest hit, with growth at close to zero this year, after 3.9 per cent in 2025, the Global Economic Prospects report said. Economies will rebound to about 5 per cent in 2027–28 after trade flows recover and reconstruction is kick-started.

 

The Iran war “will weigh heavy on growth and we are projecting a slowdown in the global economy in 2026 compared to 2025" Anna Bjerde, World Bank managing director for operations, told The National in an interview. "We are hoping for a rebound in 2027 but it all depends on the duration and intensity of the conflict."

 

She added that the Middle East as a whole is taking a “pretty big hit from this conflict in particular. The Gulf countries are taking a larger share of that hit because they are directly impacted by the conflict, and the disruption to oil and gas exports is the most prominent challenge in the region".

 

Gulf economies have also been affected by a reduction in tourism and flights, trade and logistics as the closure of the Strait of Hormuz disrupts commercial activity and drives up energy prices and inflation higher.

 

“The third aspect we worry about is there are so many people in the Gulf who work here and send remittances back home, and we worry about the reduction in those remittances because they are often a source of income for families in other countries, so that also becomes a weight.”

 

However, Ms Bjerde highlighted a strong resilience across the Gulf due to the economic diversification that will help nations withstand any shock.

 

Developing economies are also expected to record slower growth this year at 3.6 per cent, down from 4.4 per cent in 2025, before recovering to 4.2 per cent in 2027.

 

South Asia, however, is expected to record the strongest growth of any region in 2026 at 6.3 per cent, down slightly from 7 per cent in 2025.

 

The Middle East conflict has disrupted global energy flows and spurred a rally in oil prices that is stoking fears of a surge in global inflation.

 

The war which began on February 28, with Israel and the US bombing Iran, and Tehran lashing out at its Arab neighbours in retaliation, has disrupted business across the region, with an adverse impact on tourism and aviation.

 

The Strait of Hormuz has remained virtually shut as the US and Iran struggle to agree on a peace deal, with both sides enforcing a de facto blockade on the waterway that usually serves a fifth of global crude oil and liquefied natural gas supply.   - (ANA) -

 

AB/ANA/15 June 2026 - - -