WTO cuts trade and growth outlook as Middle East conflict lifts energy risks.

Summary:

• WTO cuts global trade and growth forecasts due to Middle East conflict

• Goods trade growth seen at 1.4% vs 1.9% previously

• Global GDP forecast lowered to 2.5% from 2.8%

• Energy disruptions via Strait of Hormuz driving outlook downgrade

• Higher oil and LNG prices weighing on demand and trade flows

• Energy-importing regions face greater downside risks

• AI-related goods accounted for 42% of trade growth in 2025

• AI investment could partially offset downside risks in 2026

• Services trade, including tourism, also expected to slow

• Geopolitical uncertainty reshaping global trade patterns

The World Trade Organization has downgraded its outlook for global trade and economic growth, warning that a prolonged Middle East conflict could have a deeper-than-expected impact on the global economy. Gated: Wall Street Journal.

The revision follows escalating tensions involving Iran, including disruptions to energy production and shipping routes through the Strait of Hormuz, one of the world’s most critical arteries for oil and liquefied natural gas flows. Continued attacks on energy infrastructure, including key gas facilities in Iran and Qatar, have raised concerns about sustained supply disruptions and persistently high energy prices.

Under a scenario where the conflict continues through the remainder of 2026, the WTO now expects global goods trade to grow by just 1.4%, down from a previous forecast of 1.9%. Global economic growth is also projected to slow to 2.5%, compared with an earlier estimate of 2.8%.

The downgrade reflects the broader economic impact of elevated energy costs, which act as a drag on both consumers and businesses. Higher oil and gas prices raise input costs, reduce disposable income, and tighten financial conditions, particularly in energy-importing economies across Europe and Asia. By contrast, energy-exporting countries, including the United States, may see relative support to growth from higher commodity revenues.

The WTO warned that sustained energy price increases could have spillover effects beyond trade, including risks to food security and broader cost pressures across supply chains. At the same time, disruptions to transport routes in the Middle East are compounding uncertainty, further weighing on global trade flows.

Despite the weaker outlook, some offsetting forces remain. The WTO highlighted that AI-related investment continues to provide a meaningful boost to trade. In 2025, goods linked to artificial intelligence—such as semiconductors, chips and data infrastructure—accounted for 42% of global trade growth, despite representing a relatively small share of total trade.

While demand for AI-enabling goods is expected to moderate in 2026, the WTO noted that a sustained investment cycle could partially cushion the downside from geopolitical disruptions. In a more optimistic scenario, continued strength in AI-related trade could offset the drag from higher energy prices, leaving overall trade growth closer to previous expectations.