US-Iran Tensions Cloud Global Economic Recovery

Nearly five months into the latest round of tensions between the United States and Iran, global economic recovery is facing a significant threat. The prolonged standoff has pushed up crude oil and gasoline prices, fueling concerns over regional stability.

According to World Bank Chief Economist Indermit Gill, escalating hostilities between the US and Iran could reignite inflation, drive up interest rates, and weigh heavily on global economic growth.

The World Bank lowered its global growth forecast for 2026 to 2.5 percent in June, outlining a worst-case scenario reflecting prolonged instability in the Middle East. In an interview, Gill said that this scenario is already close to becoming reality, with global growth potentially slowing to as low as 1.3 percent and global headline inflation climbing to 4.5 percent.

Prolonged fighting and damage to oil infrastructure in the region would also deepen food insecurity by disrupting shipments of fertilizer, helium, and sulfur needed in agriculture.