Global Trade and Economic Fragmentation: Geopolitical Risks and Challenges of 2026

The global economy, because of the conflict in the Middle East in 2026, has faced an unprecedented combination of geopolitical and economic challenges.

The Middle East Conflict as a New Global Shock

According to UNCTAD’s report “Trade and Development Prospects 2026,” the world economy entered 2026 with stronger indicators than expected, thanks to dynamic trade and investment in artificial intelligence. However, the situation changed sharply after the escalation of geopolitical tensions in late February 2026. The Middle East conflict disrupted energy markets, financial conditions, and key maritime routes, including the Strait of Hormuz — a critically important passage for global oil and gas trade.

The economic consequences were immediate and large-scale: oil prices rose by more than 60%, gas prices doubled, and financial volatility surged sharply in bond, equity, and currency markets. The World Bank, in its report “Global Economic Prospects,” notes that the conflict led to large-scale disruptions in exports of energy and other commodities from the Persian Gulf region, causing a sharp rise in prices. The baseline forecast assumes that the most acute phase of the disruptions ended by July 2026, and shipping volumes through the Strait of Hormuz will largely recover by the end of the year.

Slowing Global Growth and Trade

In its July edition of the “World Economic Outlook,” the IMF lowered its forecast for global economic growth in 2026 to 3.0%, 0.1 percentage point below its April forecast. Growth is expected to recover to 3.4% in 2027, but this is still below the 2024–2025 average of 3.5%. The IMF particularly highlights three key risks: continuation of the war in the Middle East, fragmentation of global trade, and a correction in artificial intelligence market expectations.

The dynamics of global trade are especially troubling. The IMF forecasts a slowdown in world trade growth from 5% in 2025 to 3.5% in 2026. Notably, 2025 growth was partly driven by companies rushing to build up inventories ahead of the introduction of American tariffs, creating a “borrowing growth from the future” effect. UNCTAD, in turn, estimates........

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