Consensus forecasts for global growth in 2026 have been cut by only 0.1 percentage point since January, to about 2.6 percent.
The East Asia and Pacific region and South Asia are expected to grow as much as, or more than, forecast in January.
More developing economies now have inflation targets, fiscal rules and larger foreign currency reserves than in earlier crises.
The war with Iran caused one of the largest disruptions to the world's oil supply in decades. Yet the global economy has so far avoided the deep downturn that used to follow similar oil shocks. That is the finding of three economists at the World Bank's Prospects Group, among them Deputy Chief Economist M. Ayhan Kose, in an analysis.
The forecast has barely moved
According to the consensus forecasts compiled by the World Bank, the global economy is expected to grow by about 2.6 percent in 2026. That is close to what was expected in January. Since then, the forecast has been cut by only 0.1 percentage point. It is also above the more pessimistic forecasts from this spring. In June, the World Bank's own forecast projected 2.5 percent.
The data covers up to 86 economies, of which 34 are advanced economies and 52 are emerging market and developing economies.
The global economy has handled large shocks before. In 2024, the IMF projected that global inflation would fall from 6.7 percent in 2023 to 4.3 percent in 2025, without the world entering a global recession.
Oil reached nearly $120
When shipping through the Strait of Hormuz was disrupted, the price of Brent crude briefly rose to nearly $120 a barrel. That was about two-thirds higher than before the conflict.
Investors first pulled back from risky assets. After the ceasefire in April, stock prices rose sharply. Optimism about AI lifted stock markets in advanced economies, and the rise then spread to many developing economies.
Four explanations
The economists point to four reasons why the economy has held up.
The first is that the energy market adjusted. Inventories were drawn down, producers outside the conflict region increased their exports, and weaker demand in several major economies held down oil prices.
The second is that governments and businesses acted quickly. They conserved energy, used strategic reserves and switched to other energy sources, including renewable energy and coal. The World Bank Group made $50 billion to $60 billion available. The amount could rise to $80 billion to $100 billion over 15 months if conditions worsen.
The third is investment in AI, which according to the economists became a strong driver of global demand. Large investments in the United States supported activity and trade. This also benefited developing economies, especially in East Asia, through higher demand for electronics and other components for AI infrastructure. New trade agreements and more diversified supply chains also contributed.
The fourth is that many developing economies entered the crisis with stronger economic policies than during earlier shocks. More of them use inflation targets and fiscal rules. Many have larger foreign currency reserves, deeper domestic capital markets and more credible central banks.
Asia is meeting its forecasts
Losses are especially large in the countries directly affected by the conflict. The East Asia and Pacific region and South Asia, however, are in line with or above the January forecasts. This partly offsets losses elsewhere.
The OECD raises its forecast
The OECD also finds that the global economy has handled the energy shock better than expected. In its latest outlook, the organization raised its global growth forecast for 2026 by 0.1 percentage point, from 2.8 to 2.9 percent. For the United States, the OECD expects 2.2 percent, and for China 4.5 percent.
The OECD points to explanations similar to the World Bank's. Large oil inventories were drawn down, more energy came from countries outside the Persian Gulf, governments put support measures in place, and AI investment boosted both production and trade.
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