Global economic growth is expected to slow to 2.6% in 2026 from 2.9% in 2025 as the Middle East crisis pushes up energy costs and creates uncertainty for businesses and financial markets.

The projection comes from the United Nations Conference on Trade and Development (UNCTAD), which warned that higher energy prices and geopolitical tensions could put further pressure on the world economy.

In its latest Trade and Development Report, UNCTAD projected that global trade in goods and services would grow by 4% in constant prices this year. However, rising energy prices are expected to contribute significantly to the increase, meaning stronger trade values may not necessarily reflect stronger underlying economic activity. Global trade reached a record $35 trillion in 2025.

Despite the global slowdown, Asia is expected to account for 59% of worldwide economic growth in 2026. UNCTAD projected India’s economy to expand by 7.3%, compared with 4.5% for China and 5.2% for Indonesia.

India’s stronger projected growth highlights the region’s importance in supporting global economic activity. However, higher oil prices could increase India’s import costs, put pressure on inflation and affect household spending and business margins. The impact will depend partly on energy prices and how long disruptions in the Middle East continue.

Trade between the United States and China has declined by more than 20% since 2024, according to UNCTAD. Meanwhile, East Asian economies have expanded trade links with both China and North America.

Restrictions on exports, foreign investment and supply chains are making it harder for businesses to enter strategic industries. These changes are pushing companies to reassess sourcing arrangements and production locations, creating both challenges and opportunities for emerging markets.

Demand for artificial intelligence-related products, including semiconductors and data-centre equipment, has emerged as an important driver of global trade. However, UNCTAD cautioned that the benefits remain concentrated among a limited number of companies and economies. A sharp correction in AI-related markets could create wider financial risks.

The World Bank projected global growth of 2.5% for 2026, while the International Monetary Fund estimated 3%. UNCTAD’s 2.6% forecast sits between the two.

The differing projections reflect uncertainty over energy prices, geopolitical tensions and investment trends. For businesses and investors, global growth, oil prices and developments in AI investment will remain important indicators to watch in the coming months.

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