The ongoing conflict in the Middle East poses a significant threat to global economic stability, with the potential to dampen growth and disrupt trade flows. New analysis from the World Trade Organization (WTO) warns that a prolonged war, coupled with sustained high energy prices, could reduce global economic growth by 0.3% and world merchandise trade by 0.5% in 2026. These figures underscore the interconnectedness of the global economy and the vulnerability of international commerce to geopolitical shocks.
The WTO’s latest forecasts, presented this Thursday, paint a concerning picture. While global merchandise trade experienced a robust 4.6% growth in the previous year, fueled by a surge in trade related to artificial intelligence and anticipatory imports ahead of potential tariff increases, the outlook for continued expansion is now clouded by uncertainty. The anticipated growth for 2024 is now projected at 1.9%, but this could fall to just 1.4% if the hostilities in the Middle East persist. A prolonged conflict isn’t just an economic issue. it has the potential to exacerbate existing food security concerns and place additional financial strain on consumers and businesses worldwide.
Impact on Global Growth and Trade
The WTO’s analysis highlights the disproportionate impact the conflict could have on countries heavily reliant on energy imports. These nations could observe their annual growth reduced by a full 1%, double the impact experienced by other countries. WTO Director-General Ngozi Okonjo-Iweala emphasized the risks associated with sustained high energy prices, noting their potential to disrupt global trade and create further pressures on food security. The ripple effects of increased energy costs extend beyond direct consumers, impacting production costs across various industries and potentially leading to inflationary pressures.
The initial surge in global trade in 2023 was partially driven by a rush to import goods before the implementation of increased tariffs announced by the United States in April of last year. However, the implementation of these tariffs was delayed until August, allowing for bilateral agreements between Washington and many of its trading partners. Subsequently, a U.S. Court ruling effectively nullified the tariff increases, mitigating their overall impact. This means the projected 1.9% trade growth for 2024 represents a return to a more normalized level, rather than a continuation of the previous year’s exceptional gains.
Resilience in Services and the Rise of AI-Related Trade
Despite the headwinds facing merchandise trade, the WTO forecasts a more positive outlook for trade in services, projecting a 4.8% increase in 2024, compared to 5.3% in the previous year. This resilience is attributed to the continued strength of high-technology product trade and the growing importance of digitally delivered services. Dr. Okonjo-Iweala pointed to the adaptability of supply chains and the absence of widespread retaliatory tariffs as contributing factors to this relative stability.
A particularly noteworthy trend is the rapid growth in trade related to artificial intelligence (AI). In 2025, the value of AI-related products increased by 21.9%, reaching $4.18 trillion, up from $3.43 trillion the previous year. These products now account for 42% of total global trade growth, despite representing only one-sixth of the overall trade volume. This growth was largely unaffected by the tariff increases, as chips, semiconductors, and data transmission equipment were excluded from the new duties.
Okonjo-Iweala’s Tenure and the WTO’s Role
Ngozi Okonjo-Iweala assumed the role of Director-General of the WTO on March 1, 2021, becoming the first woman and the first African to lead the organization. Her initial four-year term concluded on August 31, 2025, but she was re-elected on November 29, 2024, and began a second four-year term on September 1, 2025. Prior to her appointment, Dr. Okonjo-Iweala served as Chair of the Board of Gavi, the Vaccine Alliance, and held positions on the boards of Standard Chartered PLC and Twitter Inc. She as well served as a Special Envoy for the African Union and the World Health Organization, focusing on mobilizing financial support for COVID-19 responses.
Dr. Okonjo-Iweala brings over 30 years of experience in global finance, economics, and international development to her role. She is a seasoned negotiator and has been instrumental in brokering agreements that benefit all parties involved. Her leadership is particularly crucial at a time when the global trading system faces numerous challenges, including geopolitical tensions, protectionist measures, and the need to address climate change and promote sustainable development.
Key Takeaways
- A prolonged war in the Middle East could reduce global economic growth by 0.3% and world merchandise trade by 0.5% in 2026.
- Countries reliant on energy imports are particularly vulnerable, potentially facing a 1% reduction in annual growth.
- Trade in services remains resilient, with a projected growth of 4.8% in 2024.
- Trade in AI-related products is experiencing rapid growth, accounting for 42% of total global trade growth.
- Ngozi Okonjo-Iweala continues to lead the WTO, advocating for open and predictable trade flows.
The WTO’s warnings serve as a stark reminder of the fragility of the global economy and the importance of de-escalating tensions in the Middle East. Maintaining open supply chains and ensuring the free flow of goods and services are critical to mitigating the economic fallout from the conflict. The organization will continue to monitor the situation closely and provide updated forecasts as events unfold. The next key update from the WTO is expected in September 2026, with a comprehensive review of trade trends and projections.
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