Escalating geopolitical tensions in the Middle East are emerging as a significant downside risk to global trade, with the World Trade Organization (WTO) warning that sustained high energy prices could sharply weaken trade growth in 2026.
According to the WTO’s latest Global Trade Outlook and Statistics, global merchandise trade volume is projected to slow to 1.9% in 2026, down from a stronger-than-expected 4.6% in 2025, reflecting normalization after a surge driven by AI-related goods and tariff frontloading. Services trade is also expected to ease to 4.8% from 5.3%, while combined goods and services trade growth is forecast at 2.7%, compared with 4.7% last year. Global GDP growth is projected to moderate slightly to 2.8% from 2.9%.
However, this baseline outlook remains highly vulnerable to energy market disruptions linked to the Middle East conflict. A high-energy-price scenario driven by sustained increases in crude oil and liquefied natural gas (LNG) prices could reduce global GDP growth by 0.3 percentage points, while cutting merchandise trade growth to 1.4% and services trade expansion to 4.1%. Net energy-importing regions such as Asia and Europe could face trade losses of up to 1 percentage point.
A central risk lies in disruptions to key global trade corridors, particularly the Strait of Hormuz, a vital artery for global energy and commodity flows. WTO analysis indicates that vessel traffic through the route has collapsed from around 138 ships per day to near zero, severely affecting supply chains. The disruption extends beyond energy markets, with nearly one-third of global fertilizer exports typically transiting through this corridor.
The impact on agricultural trade is significant. Major economies such as India, Thailand, and Brazil rely heavily on Gulf suppliers for urea imports approximately 40–75% for India, 70% for Thailand, and 35% for Brazil making them vulnerable to rising input costs and supply constraints. At the same time, Gulf economies face their own food security pressures, with import dependency averaging 75% for rice and exceeding 90% for corn, soybeans, and vegetable oils, increasing exposure to higher logistics and rerouting costs.
Services trade is also under strain. The Middle East accounts for 7.4% of global transport services exports, and disruptions have led to the cancellation of over 40,000 flights, alongside rising insurance and freight costs. Under a prolonged conflict scenario, these pressures could structurally increase global transport costs and alter trade routes.
Despite these risks, global trade showed resilience in 2025, supported by a surge in AI-enabling goods. Trade in these products rose by 21.9% to $4.18 trillion, accounting for 42% of total trade growth, while the majority of global trade around 72% continues to operate under most-favoured-nation (MFN) terms.
WTO Director-General Ngozi Okonjo-Iweala cautioned that sustained energy price increases could have widespread spillover effects, stating that rising costs may impact food security and increase economic pressure on businesses and consumers.
Regionally, Asia is expected to lead import growth at 3.3%, while Europe (1.3%) and the Middle East (1.0%) lag behind. North America’s imports are projected to remain nearly flat at 0.3%, while the Commonwealth of Independent States (CIS) region is expected to contract.
The WTO emphasized that policy coordination remains critical to mitigating risks. Maintaining predictable trade policies, diversifying energy sources, and strengthening supply chain resilience will be key to cushioning global markets.
As uncertainty persists, the trajectory of global trade in 2026 will depend heavily on energy price movements and the duration of the Middle East conflict, underscoring the deep interlinkages between geopolitics, energy markets, and international trade.a