The UN has bad news for global growth as Middle East crisis continues

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The United Nations has lowered its forecast for global economic growth and raised inflation projections for this year, responding to the Middle East crisis and rising oil prices.

UN economists said global GDP growth is now forecast at 2.5% for 2026, down from 2.7% in January, and could fall to just 2.1% “in a more adverse scenario”.

That would be one of the weakest growth rates this century, outside of the COVID-19 pandemic and the global financial crisis of 2008, said Shantanu Mukherjee, director of economic analysis in the UN Department of Economic and Social Affairs.

“We are not close” to a recession, he said, but warned that life could get harder for billions of people, and some countries may see their economies contract.

Global inflation is projected to rise to 3.9% this year — 0.8% higher than forecast in January, before the US and Israel launched air strikes on Iran. Iran responded by blocking the Strait of Hormuz, a critical waterway for shipments of oil, natural gas, fertiliser and other petroleum products.

“Increased energy prices are a potent factor, as are the prices of refinery products that are crucial to industrial production and commercial transport,” Mukherjee said.

Not all countries will experience the same rate of inflation, he stressed. In wealthier developed countries, inflation is projected to rise from 2.6% in 2025 to 2.9% in 2026.

In developing countries, it is forecast to accelerate from 4.2% to 5.2%, as higher costs for energy, transportation and imported goods erode real incomes.

The impact of the Iran war has been highly uneven, with the most severe economic damage concentrated in West Asia — a region of 21 Arab countries including those in the Persian Gulf — according to the World Economic Situation and Prospects report for mid-2026.

Economic growth in the region is projected to plunge from 3.6% in 2025 to 1.4% in 2026, “driven not only by the energy shock but also by direct infrastructure damage and severe disruptions to oil production, trade and tourism.”

In Africa, average growth is projected to fall only slightly, from 4.2% last year to 3.9% this year. In Latin America and the Caribbean, growth is forecast to slow from 2.5% to 2.3%.

The US economy is expected to remain “comparatively resilient” with 2% growth forecast this year, broadly in line with 2025.

Europe, by contrast, “is more exposed, with heavy reliance on imported energy straining households and businesses.” Economic growth in the EU is expected to slow from 1.5% in 2025 to 1.1% in 2026, while UK growth is forecast to drop further, from 1.4% last year to 0.7% this year.

In Asia, China’s diversified energy mix, sizeable strategic reserves and government support are providing a buffer, with economic growth only expected to slow from 5% in 2025 to 4.6% this year.

India is forecast to remain one of the fastest-growing major economies, expanding by 6.4% this year, down from 7.5% in 2025.

“The question for China, similar to the case of India and other countries, is just how long this conflict and its impact will last, because all these different buffers are clearly limited,” said senior UN economist Ingo Pitterle.