The United Nations has downgraded its global economic growth forecast for 2026, warning that the escalating Middle East crisis is disrupting energy supplies, fueling inflation, and threatening to reverse development gains in vulnerable economies.
Lower Growth Projections
In its “World Economic Situation and Prospects 2026 Mid-Year Update,” released on May 19, 2026, the UN projected global growth at 2.5 percent in 2026 and 2.8 percent in 2027. These figures are lower than its January forecasts and below pre-pandemic trends.
The report highlights that the closure of the Strait of Hormuz, a critical shipping lane for around one-fifth of global oil and liquefied natural gas supplies, has triggered sharp increases in fuel, fertilizer, and food prices while straining global supply chains.
Inflation Surge
Global inflation is now projected to reach 3.9 percent in 2026, 0.8 percentage point higher than earlier estimates, reversing years of easing price pressures. The UN warned that the oil supply disruption could become “among the largest in modern history,” noting that tanker traffic through the Strait of Hormuz collapsed to near zero after March 5, cutting off around 20 million barrels per day of supply from the global market.
Brent crude oil prices are expected to remain above $100 per barrel through mid-2026 before gradually easing later in the year.
Economic Impact
Higher energy costs are eroding household purchasing power, squeezing business margins, and weakening investment confidence. Financial markets have become more volatile as investors reassess inflation and interest rate expectations. Central banks are expected to keep interest rates elevated for longer to contain inflation, while governments face mounting fiscal pressure from weaker growth and rising spending needs.
Developing economies, especially fuel- and food-importing nations in Asia and sub-Saharan Africa, are expected to bear the brunt of the crisis. The UN said rising import costs could widen fiscal deficits, worsen balance-of-payments pressures, and deepen food insecurity. The organization warned that an additional 45 million people could fall into acute food insecurity because of the latest price shocks, pushing the global total to a record 363 million people.
Trade and Growth
Global trade growth is also forecast to slow to 2.7 percent in 2026 from five percent in 2025 as shipping disruptions and higher transport costs weigh on commerce.
Despite the weaker outlook, the UN said resilient labor markets and artificial intelligence-driven investments are helping support economic activity in some major economies, including the United States and China. However, the report cautioned that prolonged conflict, persistent energy disruptions, and tighter financial conditions could further weaken growth. In a worst-case scenario where oil prices temporarily surge above $150 per barrel, global growth could slow further to 2.1 percent in 2026.
