The ongoing conflict between the United States and Iran could drag global economic growth to its lowest level since the COVID-19 pandemic, the World Bank (WB) has warned in its latest Global Economic Prospects: June 2026 report released on Thursday. The Washington-based lender has also significantly downgraded its growth forecasts for Bangladesh, citing the adverse impact of the conflict on the global economy.
The World Bank revised its global growth projection for 2026 downward to 2.5 percent from the 2.9 percent forecast it made in January. The downgrade reflects rising energy prices, accelerating inflation and persistently high borrowing costs triggered by escalating geopolitical tensions.
For Bangladesh, the World Bank cut its GDP growth forecast for FY2026-27 to 4.6 percent, sharply lower than the 6.1 percent projection announced in January. The revision represents a decline of 1.5 percentage points and comes at a time when the government has set a growth target of 6.5 percent in its proposed budget for the next fiscal year.
The development institution also lowered its forecast for Bangladesh's growth in the outgoing fiscal year. It now expects the economy to expand by 3.8 percent, down from its earlier estimate of 4.6 percent. Before the outbreak of the conflict, the World Bank had anticipated a stronger post-election economic recovery and higher growth. The government's provisional estimate puts GDP growth for the current fiscal year at 4.14 percent, although many economists believe the final figure could be lower.
The report highlights the significant economic consequences of the US-Iran conflict and warns that the situation could deteriorate further if supply disruptions persist. According to the World Bank, Iran's closure of the Strait of Hormuz in response to the conflict initiated by the United States and Israel has placed severe pressure on global energy markets and international supply chains.
The institution projects that Brent crude oil prices will average $94 per barrel this year, approximately 36 percent higher than last year's average. Fertiliser prices are also expected to rise substantially, increasing production costs in agriculture and putting additional pressure on global food prices.
As a result of disruptions in the strategic waterway, global inflation could rise to 4 percent this year, the report said. The World Bank further cautioned that if energy supply disruptions continue, global economic growth could slow to as low as 1.3 percent, while inflation could climb to 4.4 percent.
The report notes that developing economies are likely to bear the brunt of the crisis. Since January, the World Bank has downgraded growth forecasts for nearly two-thirds of the countries covered in its assessment, reflecting the broad-based impact of the conflict on emerging markets.
Commenting on the outlook, Ajay Banga, President of the World Bank Group, said: “Developing countries have faced multiple challenges over the past decade. While the impacts vary from country to country, the central test remains the same: protecting people and maintaining stability without sacrificing future growth and job creation.”
