Earlier this month, the World Bank released its flagship Global Economic Prospects (GEP) report, which starts by highlighting the risks of the ongoing conflict in the Middle East - from restricted supplies of essential commodities to higher debt-servicing costs for countries facing precarious fiscal challenges.

The report provided the Bank’s most recent projections for real gross domestic product (GDP) growth by country and region. What stood out was that its projection for real GDP growth in the United States was unchanged for 2026, while that for the Middle East, North Africa, Pakistan and Afghanistan region was revised down by 2.7 percentage points (pp). Projections for Saudi Arabia were downgraded by 1.2pp from where they were in January 2026, while those for the United Arab Emirates (UAE) and Türkiye were downgraded by 2.6pp and 0.9pp, respectively.

Against the backdrop of the US and Israel’s decision to attack Iran in February 2026, these projections raise pertinent questions: Do wars negatively impact the economies of all participants? Do they impact economies across the globe? Is the impact uneven, and if so, to what extent?

On Wars and Growth Projections

It is important to note that the GEP figures are merely projections - estimates of future growth that are influenced by historical trends, current developments, methodological techniques and data availability. They do not necessarily materialize and could be revised subject to new data and other changes.

Nonetheless, it is obvious that recent wars have inflicted more hardship and destruction on some countries than on others. Moreover, the countries that initiated recent military conflicts have seen their forecasts either unchanged or boosted months after the start of their campaigns.

Take the example of Russia. After the 2022 invasion of Ukraine, the GEP’s June 2022 edition projected an 8.9% reduction in Russia’s GDP in 2022. As the war continued, this forecast was revised upward given the Russian economy’s better-than-expected performance. In the January 2023 version, the estimate stood at -3.5%, a 5.4pp improvement after only six months. Meanwhile, the GDP forecast for the Sub-Saharan Africa region was revised downward, as were those for the South Asia and East Asia and Pacific regions. In fact, middle- and low-income countries saw their GDP projections slashed by 1.3pp and 0.8pp, respectively.

What Can We Make of This?

First, the current globalized international order facilitates the externalization of war’s economic impact. Looking at the US/Israel war on Iran, it’s worth noting that nearly a third of globally traded seaborne fertilizer passes through the Strait of Hormuz. Up to 50% of Africa’s synthetic fertilizer supplies come from the Persian Gulf, while 80% of oil and 90% of the liquefied natural gas (LNG) passing through the strait are exported to Asian countries. While GDP downgrades for countries of the region are expected, the GEP also reported downgrades for Sub-Saharan Africa, Latin America, and East Asia. These regions have seen imports of key commodities passing through the strait reduced, pushing prices higher and triggering inflation. Over time, cost-of-living pressures would force consumers in these regions to reduce demand for goods and services, which would (other things being equal) reduce GDP. Our globalized trade and commercial system, underpinned by globally interconnected supply chains, reinforces these impacts.

Second, the asymmetrical international political and economic order in place prevents compensating uninvolved countries that are harmed. Some of the recent conflicts were initiated unilaterally, without United Nations approval. However, even if they were UN-sanctioned, neither the UN nor any multilateral entity is capable of enforcing a situation whereby initiators of war compensate third countries for economic damage.

Third, while wars could unevenly impact uninvolved countries in the short term, history indicates that all countries lose over time. For example, in 2025, the Centre for Economic Policy Research (CEPR) projected that Russia had lost $1.69 trillion from the war in Ukraine, with Ukraine losing approximately $400 billion. Meanwhile, 108 days of the Iran war have cost the US taxpayer at least $113 billion, Israel at least $11 billion and Iran $270 billion.

Therefore, not only are projections such as the GEP’s prone to revision, but they also do not account for many of the medium- to long-term consequences of war for everyone. GDP forecasts primarily capture expected economic activity over the short- to medium-term. They do not fully reflect future inflationary pressures, higher debt burdens, disrupted trade relationships, damaged infrastructure or the broader human and social costs associated with military conflicts.

Once we go beyond these projections to consider the probable medium- to long-term inflation, cost-of-living pressures, reduced international trade, higher interest rates, debt-servicing costs and labor market dysfunctionalities, it becomes clear that the damage ultimately affects everyone, and with that, the lyrics of Norman Whitfield and Barrett Strong’s famous song “War” carry further resonance.

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