Mideast Conflict Casts Shadow on Global Economic Forecasts

Global finance leaders are gathering in Washington this week as the ongoing Middle East war is expected to reshape near-term economic messaging from the International Monetary Fund (IMF) and the World Bank. Officials signaled that updated projections are likely to reflect weaker growth expectations and higher inflation assumptions than previously anticipated, as the conflict adds fresh shocks to an already uneven global recovery.

Last week, the IMF and World Bank indicated that emerging markets and developing countries are set to bear a disproportionate share of the fallout. They pointed to elevated energy prices and supply chain disruptions linked to the conflict as key channels through which the war is affecting economies that often have less fiscal space and higher exposure to imported fuel and essential goods.

Before the war began on February 28, both institutions had been preparing for upward revisions to growth forecasts. The conflict has since altered that trajectory, introducing new pressures that complicate policy choices and slow recovery momentum across regions.

The World Bank’s updated baseline estimate now puts growth in emerging markets and developing economies at 3.65% for 2026, down from the 4% forecast issued in October. The World Bank also outlined a downside path in which growth could drop to 2.6% if the conflict is prolonged, underscoring how duration and spillovers could materially change outcomes.

Inflation projections have also shifted. The World Bank now expects inflation in these economies to reach 4.9% in 2026, compared with a prior estimate of 3%. In a severe scenario, it said inflation could rise to 6.7%, highlighting the risk that energy and logistics disruptions could feed through to broader price pressures.

The IMF warned that if the war continues and keeps disrupting critical fertilizer shipments, an additional 45 million people could face acute food insecurity. That warning links the conflict’s trade and transport effects to humanitarian risks, particularly in countries where food costs are a large share of household spending.

On financing needs, the IMF said it expects demand for $20 billion to $50 billion in near-term emergency support for low-income and energy-importing nations. The World Bank said it can mobilize about $25 billion through crisis response instruments in the short term, and that this could rise to $70 billion within six months if required.

Economists have urged governments to use targeted and temporary measures to cushion price shocks, while warning that broad-based interventions could intensify inflation. Even with these tools, uncertainty remains high because the economic path depends on how long the conflict lasts and how severely energy markets and supply chains are disrupted.