GENEVA, SWITZERLAND, March 19, (V7N)— The World Trade Organization (WTO) on Thursday warned that the ongoing Middle East conflict could significantly slow global trade growth, with merchandise trade volumes projected to rise by as little as 1.4 percent this year under a high energy price scenario.

The warning comes as the WTO released its annual global trade outlook nearly three weeks into the escalating war, which has disrupted energy markets and heightened fears of a broader economic downturn.

“Sustained increases in energy prices could increase risks for global trade, with potential spillovers for food security and cost pressures on consumers and businesses,” WTO Director-General Ngozi Okonjo-Iweala said in a statement.

The conflict, triggered by US-Israeli military action against Iran on February 28, has led to widespread instability across the Middle East. Iran’s retaliatory actions and threats have nearly halted shipping through the Strait of Hormuz, a critical route that typically carries around one-fifth of the world’s oil supply.

According to the WTO, the disruption has driven up energy prices and increased uncertainty, prompting economists to revise earlier projections for global trade.

In its baseline scenario — which assumes no major energy price shock — global merchandise trade growth is expected to slow to 1.9 percent in 2026, down sharply from 4.6 percent in 2025. This scenario also anticipates a slight decline in global GDP growth from 2.9 percent last year to 2.8 percent this year and in 2027.

Despite the slowdown, the WTO noted that global trade has shown resilience, supported by strong demand for high-technology products and digitally delivered services, as well as adaptive supply chains and stable trade policies.

Under this scenario, services trade is forecast to grow by 4.8 percent this year and 5.1 percent in 2027, while merchandise trade could rebound to 2.6 percent growth by 2027.

However, the outlook becomes more concerning under a high energy price scenario. If oil and liquefied natural gas prices remain elevated throughout the year, global GDP growth could be reduced by 0.3 percentage points, leading to a further slowdown in trade.

In that case, merchandise trade growth would drop to just 1.4 percent in 2026, while services trade expansion would also weaken to 4.1 percent, the WTO said.

“This baseline forecast is under pressure from the conflict in the Middle East,” Okonjo-Iweala cautioned, urging member countries to maintain predictable trade policies and strengthen supply chain resilience to mitigate the economic impact.

The WTO also noted that a more optimistic outcome remains possible if the conflict is short-lived and demand for artificial intelligence-related goods continues to drive trade. In such a scenario, merchandise trade growth could reach 2.4 percent this year and 2.7 percent by 2027.

As the war continues to disrupt critical energy infrastructure and supply routes, economists warn that prolonged instability could place a heavier burden on global markets, with far-reaching consequences for trade, inflation, and economic growth.

END/WD/RH