TEHRAN- As the United States under Donald Trump has once again unleashed military strikes against Iran and reinstated what the US president calls a “naval blockade” in the Strait of Hormuz, the World Bank has issued a stark warning that the escalating hostilities could slash global economic growth to a mere 1.3 percent in 2026—down from 2.9 percent last year—while reigniting inflation and driving interest rates perilously higher.
The World Bank’s chief economist, Indermit Gill, who retires at the end of August, revealed in an interview with Reuters that the institution had modeled three scenarios in its June economic forecast given the high uncertainty surrounding the war in West Asia. The worst-case scenario—hostilities lasting six months or more—has already come dangerously close to materializing, largely thanks to Trump’s belligerent policies. Under that scenario, global headline inflation would reach a crippling 4.5 percent.
Trump’s naval blockade and collapse of diplomacy
The current crisis did not emerge from a vacuum. It is the direct consequence of the Trump administration’s reckless decision to abandon the “Islamabad Memorandum of Understanding” on July 7, 2026, following unsubstantiated claims of an attack on vessels transiting south of the Strait of Hormuz. Trump, in his characteristic bombast, not only resumed aggressive military strikes against Iran but also boasted about reinstating a naval blockade—an act that international law experts have condemned as a violation of maritime freedoms. Speaking on the sidelines of the NATO summit in Ankara, Trump cynically declared that “there is no longer any agreement with Iran and the ceasefire had ended,” effectively shredding whatever fragile diplomatic channels remained.
The consequences have been immediate and devastating. Iran has responded defensively by targeting US bases that launched the initial attacks, and global attention has once again fixated on the Strait of Hormuz as the epicenter of a new conflict. Shipping traffic remains disrupted, and Trump’s unilateral aggression has thus triggered a cascade of instability across the entire West Asian region, jeopardizing not just regional security but the global economy.
A slow-moving train wreck for the world’s poorest
Gill has described the unfolding crisis as a “slow-moving train wreck,” and his assessment is chilling. Poor countries that have still not recovered from the COVID-19 pandemic will face even more severe food insecurity, while nations with heavy debt burdens will be crushed by rising borrowing costs as interest rates climb. “My own sense of it is, maybe we are a few months away from that,” Gill warned, noting that as soon as inflation accelerates, heavily indebted countries could face grave problems meeting their debt service payments within just months.
The data paints a grim picture. The World Bank’s June forecast showed that 40 percent of low- and middle-income countries—32 nations in total—are either already in debt distress or at high risk of falling into it. If interest rates rise, that number could increase rapidly. The average debt-to-GDP ratio for emerging and developing economies reached approximately 74 percent in 2025, up from 50-55 percent before the pandemic. For low-income countries, that ratio has skyrocketed from 40 percent to 67 percent.
Trump’s actions are not merely reckless; they are morally indefensible. While the world’s three largest economies—the US, China, and India—have remained relatively insulated from the war’s impact due to their resources, developing countries are bearing the brunt of a crisis they did not create. Gill noted that some countries “have no choice but to benefit from debt relief,” but even those that avoid default will see their long-term growth prospects diminished as they drain resources from education, health, and other vital sectors.
The irony is bitter. Trump claims to be protecting American interests, yet his aggression has inflicted profound suffering on the most vulnerable nations. Signs of strain are already emerging, with cash-strapped countries asking the IMF for augmented loans and Pakistan reportedly seeking a $10 billion stabilization facility from the United States. Trump’s macho posturing has done nothing to secure America’s position—it has only destabilized the global economy and condemned millions to hunger and poverty.
Gill offered a sliver of hope, noting that developing countries could benefit from artificial intelligence and the productivity gains it promises. “AI can be a huge gain” for poorer nations, he said, and could help restore growth to levels unseen in decades. But that potential remains distant—probably not achievable within this decade. In the meantime, Trump’s reckless adventure in West Asia threatens to undo years of progress and push the world toward an economic catastrophe that will be measured not just in percentage points, but in human lives.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: tehrantimes.com
