The World Trade Organization (WTO) has sharply cut its forecast for the growth of global merchandise trade to 1.9% this year, down from 4.6% in 2025, largely due to the escalating conflict in the Middle East which is driving energy prices upward and disrupting global transportation networks. This dire prediction was elaborated in a report released this Thursday by the WTO, indicating that persistent geopolitical tensions could have far-reaching implications for international commerce.

Last year's trade performance was buoyed by a surge in trades related to artificial intelligence and companies pre-shipping goods to circumvent looming tariffs from the United States. Despite the resilience shown in global trade, which has been supported by the burgeoning demand for AI-related products, the trade forecasts are now under significant pressure from the ongoing military confrontations involving the U.S. and Israel against Iran. WTO Director-General Ngozi Okonjo-Iweala underscored that the precarious situation in the Middle East could hinder trade prospects for the near future.

If high prices for crude oil and liquefied natural gas (LNG) are sustained through 2026 as a consequence of the conflict, the global merchandise trade growth could fall further to an alarming rate of 1.4%. This continued decline would not only affect economic activities worldwide but could also ripple into domestic markets, impacting prices and supply chains. The WTO's updated outlook highlights the interconnectedness of global markets and the fragile state of international trade amid geopolitical uncertainties.