World Bank President Warns of Global Economic Domino Effect Despite US-Iran Truce

World Bank President Ajay Banga stated that the conflict in the Middle East will have a cascading impact on the global economy, regardless of whether a ceasefire announced by U.S. President Donald Trump remains in effect.

In an interview with Reuters on April 10, 2026, Banga warned that the economic fallout from the war is already contributing to weaker global expansion, with ripple effects expected across both advanced and emerging economies.

Impact on Global Growth

Under a baseline scenario where the ceasefire takes hold, global growth could be reduced by 0.3 to 0.4 percentage points.

The risks increase if the conflict persists. In a prolonged-war scenario, Banga said global growth could decline by as much as 1 percentage point, which underscores the sensitivity of markets to geopolitical shocks.

Pressure on Emerging Markets

Emerging markets and developing economies are expected to bear a disproportionate share of the economic slowdown.

The World Bank has adjusted its 2026 growth projection for these economies to 3.65%, a decrease from the 4% estimate provided in October.

In a more adverse scenario tied to a longer-lasting war, growth for these economies could drop as low as 2.6%.

Inflation and Supply Disruptions

Inflationary pressures are intensifying alongside growth challenges. Inflation in emerging and developing economies is now forecast at 4.9% for 2026, up from a previous estimate of 3%.

In a worst-case scenario, inflation could surge to 6.7%, reflecting higher energy costs and supply disruptions linked to the conflict.

Additional estimates indicate that inflation could increase by 200 to 300 basis points, with a potential impact of up to 0.9 percentage point if the war continues.

The conflict has already caused oil prices to rise by 50% and disrupted the supply of gas, fertilizer, and helium.

Economic disruptions have also extended to the tourism and air travel sectors.

Fiscal Warnings and Global Dialogue

Banga cautioned countries to avoid establishing energy subsidies that they cannot afford.

These economic warnings come as the World Bank and International Monetary Fund (IMF) prepare for their annual meetings in Washington, which are scheduled to begin on April 13, 2026.

The meetings are expected to provide a forum for dialogue among member nations regarding the consequences of unilateral actions on the broader global economy amid the crisis.