WEF survey: Middle East war is top threat to global economy

Geopolitical uncertainty driven by the ongoing war in the Middle East poses the greatest risk to the global economy, far outweighing concerns over asset bubbles or trade disruptions, according to the World Economic Forum's September Chief Economists' Outlook released Tuesday at the Sustainable Development Impact Meetings in New York.thenationalnews+1

Ninety-seven percent of chief economists surveyed by the WEF cited the Middle East conflict, now in its seventh month, as a serious threat to economic growth over the next 12 months. Iran's continued attacks on commercial vessels transiting the Strait of Hormuz — a waterway that normally carries about a fifth of global oil and gas supply — have pushed shipping traffic to among its lowest levels since the conflict began. In late August alone, Tehran threatened 46 commercial ships passing through the strait.thenationalnews

Oil Markets Under Strain

The disruption is reverberating through global energy markets. Societe Generale Société Générale S.A. strategists warned this week that global oil product markets have shifted "from tight to critical," citing pipeline disruptions, Russian refinery outages, elevated freight costs and low inventories. Freight rates have risen tenfold on some key shipping routes, feeding through to end-user prices. The bank cautioned that under a scenario of prolonged military tensions, Brent crude could exceed $150 per barrel.fxstreet

The WEF report found that asset price correction was flagged by 58 percent of respondents as a threat, while trade and investment restrictions were cited by 42 percent. War-driven energy shocks came in at 39 percent, with supply chain disruptions at 17 percent.thenationalnews

Regional Fallout

The International Monetary Fund cut its 2026 growth forecast for the Middle East and Central Asia to 0.7 percent in July, a 1.2 percentage point downgrade from April, due to the fallout from the Hormuz disruption. The IMF expects a rebound to 6.5 percent in 2027.thenationalnews+1

Saudi Arabia's economy contracted 4.8 percent in the second quarter, with oil activity declining 24.7 percent, the WEF noted. Iran's economy is projected to shrink 5.4 percent this year, with the country recording inflation of 84.4 percent in August.thenationalnews

Despite the grim backdrop, the WEF's September survey struck a slightly more stable note than its May edition. About 57 percent of chief economists now expect moderate or stronger growth in the Middle East and North Africa over the next 12 months, up from just 12 percent in May. Inflation expectations have also moderated, with 62 percent anticipating moderate inflation compared with 55 percent expecting high or very high inflation in the previous survey.weforum+1

Broader Risks

Beyond the Middle East, the report flagged escalating attacks by Ukraine and Russia on Black Sea ports, which could reduce global cereal exports by as much as 17 percent this year. The WEF concluded that the "broader outlook remains sensitive to disruptions in energy production and transport flows".thenationalnews