Hormuz shock to hit global growth outlook, India emerges as a bright spot: WEF

The global economy is entering a period of rising uncertainty, inflation and geopolitical risk, according to the May 2026 Chief Economists’ Outlook released by the World Economic Forum. The report says the ongoing Middle East conflict and disruptions in the Strait of Hormuz could reshape trade flows, energy markets and global business strategies. 

The survey, conducted between April 6 and April 17 among leading chief economists, found that 89% of respondents expect global growth to weaken over the next 12 months, with 21% forecasting a “significantly weaker” outlook. 

At the centre of the concern is the escalating Iran-Israel-US conflict, which has severely disrupted the Strait of Hormuz — one of the world’s most critical trade chokepoints. Before the crisis, nearly 10% of global seaborne trade passed through the strait annually. 

The closure has triggered supply shortages of crude oil, liquefied natural gas and fertilizer-related goods, while Brent crude temporarily crossed $125 per barrel in April. Economists surveyed by the WEF believe the damage from a prolonged Hormuz shutdown could approach the scale of the COVID-19 disruption. 

Inflation fears intensify 

Inflation has emerged as the biggest global concern. According to the report, 94% of surveyed economists expect global inflation to rise over the next year, driven mainly by energy and food prices. 

The WEF warned that fertilizer shortages caused by shipping disruptions could eventually evolve into a wider food crisis. Up to 30% of globally traded fertilizers normally pass through the Strait of Hormuz, meaning prolonged disruptions could sharply raise farming costs and hurt agricultural output later this year. 

While food prices have not yet surged as sharply as during the Russia-Ukraine crisis of 2022, economists believe risks are building steadily. More than four in five chief economists expect food prices to increase across major regions. 

Energy prices are also expected to rise sharply, especially in South-East Asia, Europe and India. Around 41% of respondents expect significant energy-price increases in India over the next 12 months. 

India among strongest-performing economies 

Despite global turbulence, India emerged as one of the brightest spots in the WEF survey. The report identifies India as the geography with the strongest growth expectations among all regions surveyed. 

More than half of surveyed economists expect strong or very strong growth in India over the next year, supported by infrastructure spending, technology investment and domestic manufacturing initiatives. 

However, the WEF cautioned that India remains vulnerable to imported inflation and external shocks stemming from the Middle East conflict. The report noted that the Reserve Bank of India deployed nearly $40 billion in forex reserves in March to stabilize the rupee amid depreciation pressures. 

The economy is projected to grow 6.5% in 2026-27, though it faces risks from the West Asia conflict and inflationary pressures. Inflation is now seen as India’s “most pressing concern,” with 61% of economists expecting high or very high inflation over the coming year. 

AI enthusiasm cools 

Artificial intelligence continues to be viewed as a major long-term growth driver, though economists are becoming more cautious about how quickly productivity gains will arrive. 

More than 90% of respondents still expect AI adoption to increase over the next year, particularly in information technology, digital communications and financial services. 

However, compared with earlier surveys, economists now believe broad productivity improvements from AI could take longer than expected. Infrastructure bottlenecks, skills shortages, regulation and uneven adoption across industries are slowing the pace of transformation. 

The report says the first major productivity gains are likely to remain concentrated in digitally intensive sectors where AI can directly interact with data, code and workflows. 

Multinationals shifting strategies 

The WEF survey also found that multinational companies are reassessing global business strategies in response to rising geopolitical risks. 

The United States was ranked as the most attractive business environment by surveyed economists, followed by India and South-East Asia. 

India’s appeal lies in its combination of scale, growth potential, policy continuity and increasing openness to trade and investment. South-East Asia, meanwhile, is benefiting from supply-chain diversification as companies seek alternatives amid geopolitical fragmentation. 

Europe retained some attractiveness because of regulatory predictability and affluent consumer markets, while China’s competitiveness was tempered by slim profit margins and intense domestic competition. 

The report concludes that the global economy is entering a period where geopolitical tensions, energy security and supply-chain resilience will increasingly shape economic policy and corporate decision-making, potentially redefining globalization itself.