The World Bank and IMF on Thursday slashed key growth projections, warning that the conflict in the Middle East is weighing on the global economy, as rising energy prices and heightened market uncertainty threaten growth.

A man sitting on a chair watches the Chemical Tanker CORAL STAR (L) and the Oil and Chemical Tanker HAFNIA MAGELLAN waiting in the Grand Port Maritime de Marseille-Fos in Fos-sur-Mer, off the Mediterranean coast of southern France, March 11, 2026. /VCG

In its latest Global Economic Prospects report, the World Bank lowered its 2026 global growth forecast to 2.5% but warned that growth could slow further to 1.3% if energy supply disruptions intensify and trigger financial market stress.

The World Bank said the conflict has pushed up energy prices, adding inflationary pressures and increasing the likelihood of tighter monetary policy, particularly affecting energy-importing economies. Commodity prices are expected to rise by 22% this year, said the report. However, it noted that greater investment in artificial intelligence could help support economic activity.

The World Bank's forecast for the US economy this year was kept at 2.2%, as in January, while the growth outlook for 2026 in the euro area and emerging markets was downgraded by 0.1 percentage points to 0.8% and by 0.4 percentage points to 3.6%, respectively.

In concurrence with the World Bank, the IMF also cut its 2026 growth forecast for the euro area to 0.9%, down from 1.1% projected in April, and raised its inflation outlook to 2.8%, citing the impact of higher energy costs.

IMF described the Middle East conflict as a "large but temporary adverse supply shock" that has weakened the region's economic outlook.

The dire reminder of the conflict's detrimental impact on the global economy does, however, come at a time when there is optimism that a US-Iran deal is close, and may be signed imminently between the two nations in Europe, as per US President Trump.