Rising oil prices driven by the ongoing conflict in the Middle East could weigh heavily on global economic growth, the European Bank for Reconstruction and Development (EBRD) has warned, as energy markets face sustained volatility.
The EBRD, an institution originally established to help former Soviet bloc countries transition to market economies and now operating across Europe, the Middle East, and Africa, said on Thursday that a prolonged period of oil trading at $100 per barrel or higher could dampen global growth and stoke inflation pressures worldwide.
Beata Javorcik, the bank’s chief economist, highlighted that historically, a 10-per cent increase in average oil prices corresponds to a 0.1 percentage-point drop in global growth. With Brent North Sea crude trading above $105 this week—up roughly 40-45 per cent since the start of the US-Israel-Iran conflict nearly a month ago—the bank cautioned that the impact could be significantly larger.
“If oil remains above $100 per barrel for a prolonged period, and supply-chain disruptions in chemicals and metals continue, global growth could decline by at least 0.4 percentage points, while inflation may rise by more than 1.5 points,” Javorcik said. She noted that economies heavily reliant on energy imports, or with strong trade and remittance links to the Gulf, are particularly vulnerable.
The EBRD further indicated that growth forecasts for its regional economies could be lowered by up to 0.4 percentage points when the bank revises its projections in June. Javorcik also warned that the broader effects of the conflict could strain government budgets already pressured by high defence spending in Central Europe and rising debt-servicing costs in Southern, Eastern Mediterranean, and sub-Saharan African countries.
Meanwhile, the Organization for Economic Cooperation and Development (OECD) on Thursday maintained its global growth forecast at 2.9 per cent for 2026 but downgraded Europe’s outlook. The organization noted that growth had been holding up before the conflict and suggested that global expansion could have been 0.3 percentage points higher had the Gulf tensions not escalated.
At the same time, World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala sounded the alarm on the state of global trade. Speaking at the opening of the WTO ministerial conference, she described the current disruptions as the “worst in the past 80 years,” noting that even before the Gulf crisis, global trade in energy, fertilisers, and food was already destabilized.
“The world order and the multilateral system we once knew has irrevocably changed,” Okonjo-Iweala said, emphasising the unprecedented scale of challenges confronting governments, businesses, and markets worldwide.
With oil prices at record levels and geopolitical tensions showing no immediate signs of easing, analysts say the coming months could prove critical for both global growth and inflation, particularly in energy-dependent economies.
