The Middle East war is poised to slow global growth and deepen inflation pressures even if a fragile ceasefire holds, the World Bank warned on Friday.
World Bank President Ajay Banga said the conflict is already sending shockwaves through energy and trade systems. He described the economic outlook as increasingly uncertain.
He estimated global growth could fall by 0.3 to 0.4 percentage point in a baseline scenario. A prolonged conflict could cut growth by up to 1 percentage point.
Inflation could rise by 200 to 300 basis points, with sharper increases if the war escalates further, he added.
Oil prices have surged about 50 percent since the conflict began, tightening supplies of fuel, gas, fertiliser and industrial gases.
Tourism and air travel have also been disrupted, adding further strain to an already fragile global recovery.
Banga warned that the current ceasefire remains fragile and risks collapse if diplomatic efforts fail to hold.
He said any renewed escalation could cause longer-term damage to energy infrastructure and global trade routes such as the Strait of Hormuz.
The World Bank is preparing crisis-response support for vulnerable developing nations facing rising energy costs and debt pressures.
Some countries, including small island states, may access existing funding without new approvals under emergency mechanisms.
Banga urged governments to avoid unsustainable energy subsidies that could worsen fiscal imbalances in the long term.
He emphasised targeted and temporary relief measures to protect fiscal space and prevent deeper economic strain.
Nigeria could benefit from increased energy resilience, supported by a $20 billion Dangote refinery investment boosting output and exports.
Mozambique is also working with the World Bank to expand natural gas and hydropower capacity.
Banga said diversification into nuclear, hydro, geothermal, wind and solar is essential to avoid deeper reliance on traditional fuels.
