The World Bank has issued a stark warning over the state of the world economy, cautioning that the economic fallout from the U.S.-Iran war will drag global growth down to its weakest level since the COVID-19 pandemic. In its latest assessment, the institution now forecasts global growth of just 2.5 percent for 2026, a sober reading that reflects how heavily the conflict and its knock-on effects are weighing on the global outlook.
The Bank also set out a darker scenario should conditions deteriorate further. It cautioned that if energy disruptions worsen alongside fresh financial market stress, global growth could slow to as low as 1.3 percent. Such an outcome would mark a severe deterioration from the baseline forecast and would leave the world economy expanding at little more than half the pace already pencilled in for the year ahead.
For the United States, the World Bank held its projection steady, maintaining its 2026 forecast for the U.S. economy at 2.2 percent. Looking a year further out, however, the institution expects momentum to fade, with growth seen tapering to 2.1 percent in 2027. The figures suggest the American economy is expected to remain comparatively resilient in the near term, even as the broader global picture darkens.
China did not escape the downgrade. The World Bank cut its growth forecast for the Chinese economy to 4.2 percent in 2026, a downward revision of 0.2 percentage points from the projection it had issued back in January. The adjustment underlines how the deteriorating external environment is being felt even by some of the world's largest economies, which had been counted on to anchor global demand.
The pain, the Bank stressed, will not be evenly shared. It noted that some countries are being hit hardest by the current turmoil, with many set to end the year poorer than they were before the pandemic. That assessment points to a widening gap between economies able to weather the shocks and those at risk of losing years of hard-won progress in living standards and development.
Against that backdrop, the World Bank signalled that it intends to step in to cushion the blow, saying it plans to provide financial support. With the war between the United States and Iran, volatile energy markets and jittery financial conditions all feeding into the gloom, the institution's message was that the months ahead represent one of the most fragile periods for the global economy in years.