West Asia Conflict Impact: Global Growth Slows Amid Historic Energy Shock

The West Asia conflict is dragging global growth and triggering a historic energy shock, ANI reported.

Global economic growth is projected to ease to 3.2 per cent in 2026 from 3.4 per cent a year earlier, as escalating tensions in West Asia trigger what analysts describe as the most severe energy shock on record, according to a report by S&P Global cited by CRISIL.

The report warns that the widening conflict is increasingly disrupting global shipping routes, energy supplies, trade flows and critical infrastructure, compounding risks to an already fragile outlook.

According to ANI, “This is the largest energy shock on record,” the report noted, adding that the eventual economic fallout will depend on the scale, intensity and duration of the conflict. Growth, which had shown signs of upside potential before the crisis, is now expected to slow.

A major source of concern is the disruption to energy supply chains. The Strait of Hormuz — a vital artery for roughly one-fifth of global oil shipments — is operating under restricted passage, while several oil production facilities across the region have been forced to shut down.

The situation has been exacerbated by infrastructure damage, including the partial shutdown of Qatar’s largest liquefied natural gas (LNG) facility, further tightening global energy markets.

S&P Global cautioned that risks to its baseline projections remain “decisively on the downside,” particularly if supply disruptions intensify, ANI reported.

Under its base-case scenario, Brent crude is expected to average $92 per barrel in the second quarter, ease to around $80 in 2026, and fall further to $65 by 2027. However, prices could rise sharply if there is lasting damage to key infrastructure — especially Iran’s Kharg Island facilities — or if the Strait of Hormuz faces prolonged closure.

The report also flagged a significant upward revision in LNG price forecasts, reflecting tightening supply conditions.

Energy-importing regions such as Europe and Asia are expected to bear the brunt of the shock, as elevated fuel costs weigh on economic activity.

Overall, the report underscores how the deepening West Asia conflict has reshaped the global economic landscape, placing energy markets at the centre of the disruption.

(With inputs from ANI)