World Bank warns of 1.3% global growth

World Bank Group chief economist Indermit Gill warned that escalating hostilities between the United States and Iran could slash global economic growth to as low as 1.3% in 2026, down from 2.9% in 2025, and push global inflation to 4.5% under the worst-case scenario. The conflict has escalated with U.S. bombing targets in Iran and Iran hitting U.S. sites in Bahrain, Kuwait, and Jordan. Shipping disruptions in the Strait of Hormuz and a Houthi naval blockade on Saudi Arabian shipments through the Bab-el-Mandeb strait threaten oil and food supplies. Developing countries face heightened risks of debt distress and food insecurity, while major economies like the U.S., China, and India remain relatively insulated. Gill noted that 40% of low- and middle-income countries are already in or at high risk of debt distress, and rising interest rates could worsen the situation. He also highlighted potential benefits of AI for developing countries.