The World Bank warns the Iran war is pushing developing nations toward stagnation, cutting global growth to its lowest level since the COVID pandemic.
More than 40 low-income countries face years of economic stagnation if the conflict is not resolved quickly, it says.
The report was timed to coincide with the US-Iran peace deal signing in Geneva on June 19, 2026.
How the Iran War Is Damaging Developing Nations and Global Growth
The Strait of Hormuz closure disrupted roughly 20 percent of global oil supply for more than 100 consecutive days.
Energy prices rose sharply across every major importing economy as oil markets absorbed the prolonged supply shock.
The World Bank says global growth projections have been significantly cut as a direct result of the conflict.
Trade disruption, rising tariffs, and elevated post-pandemic debt have compounded the damage across vulnerable regions.
Sub-Saharan Africa and South Asian nations that import most of their fuel have borne the heaviest burden.
Which Countries Face the Gravest Risk
The World Bank identified more than 40 nations across Africa, South Asia, and parts of Latin America as most at risk.
These countries lack the foreign exchange reserves needed to absorb sustained and severe oil price shocks.
Their public debt burdens have risen substantially since the pandemic, leaving little room for economic stimulus measures.
Without a durable peace deal, several of these nations face the prospect of multi-year economic decline.
Read our deeper analysis of the global economy in 2026 and who is most exposed to the downturn.
What a Lasting Peace Could Change
The World Bank says a successful and durable peace deal could recover a substantial share of the lost global growth.
Crude oil prices are expected to fall 10 to 15 percent as soon as the Strait of Hormuz is verified open again.
Trade flows would normalize, and import costs would fall quickly for the developing nations hit hardest by the crisis.
However, the Bank warned that a partial or fragile peace leaving Hormuz in dispute could extend economic damage by a year.
See our full coverage of the US-Iran peace deal signed in Geneva on June 19, 2026.
Inflation Pressure in Developed Economies
In wealthier nations, the Iran conflict’s main transmission has been through sharp, energy-driven inflation.
The United States recorded 4 percent inflation in May 2026, the highest rate since 2023, driven by gas prices.
Germany and Italy each reported headline inflation above 3.5 percent for the first time in several years.
Central banks in the US, EU, and UK are all monitoring the situation but have held off on further rate increases.
Reuters Economics is publishing updated country-by-country projections as the World Bank assesses how quickly developing nations can recover once the Strait of Hormuz reopens.
AP News reported that the World Bank warned even a partial peace deal leaving Hormuz in dispute could extend economic stagnation by a full year.
The Path to Economic Recovery
If the peace deal holds, the World Bank projects developing economies could return to trend growth by mid-2027.
Emergency debt relief discussions and IMF support packages are being prepared for the most vulnerable affected nations.
These programs are expected to accelerate significantly in the weeks and months following the Geneva signing.
The 60-day negotiation window in the MOU will ultimately determine how quickly economic recovery can begin in earnest.
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