WASHINGTON (AP) — The economic fallout from the Iran war — higher energy prices and increased uncertainty — will drag down global growth this year, the World Bank said Thursday.
The 189-country anti-poverty agency expects the world economy to grow just 2.5% this year, its weakest performance since the COVID-19 pandemic upended global commerce six years ago.
The bank downgraded its forecast for growth in two-thirds of the world's countries.
But the United States, which started the war by joining Israel to attack Iran on Feb. 28, is being spared a downgrade. The World Bank still expects the world's biggest economy to grow 2.2% this year, unchanged from a January forecast and up a tick from 2.1% in 2025.
As a major energy producer, the world's biggest economy is more resilient than countries that import their oil and natural gas, and the U.S. economy is benefiting from big tax cuts and booming investment in artificial intelligence. But ordinary Americans are still frustrated by higher gasoline and other prices.
Other economies are getting hit harder. The World Bank is slashing its 2026 growth forecast for developing and emerging market countries by 0.4 percentage points to a post-pandemic low of 3.6%. In those countries, the bank said, "the disruption in energy supplies and sharp increase in energy prices caused by the conflict have dampened confidence and weakened broader economic activity.''
China, the world's No. 2 economy, is expected to register economic growth of 4.2% this year, down from 5% in 2025 and from the 4.4% the bank had forecast for this year back in January. India is once again expected to be the world's fastest-growing major economy, expanding 6.6% this year; but that's down sharply from 7.7% in 2025.
The 21 European countries that share the euro currency are collectively expected to eke out 0.8% growth this year, down from 1.4% in 2025.
Iran responded to U.S. and Israeli attacks by closing down the Strait of Hormuz, through a fifth of the world's oil and natural gas passes. Energy prices rocketed. The World Bank expects the price of the benchmark Brent crude oil to average $94 a barrel this year, up 36% from 2025 and 50% more than the bank had forecast in January.
The war has also disrupted trade in fertilizer, much of which is exported through the Persian Gulf. That could lead to food shortages as farmers skimp on fertilizer to avoid higher costs.
FILE - A woman walks past the World Bank building in Washington on April 5, 2021. (AP Photo/Andrew Harnik, File)PRNTO
LONDON (AP) — U.K. Defense Secretary John Healey unexpectedly quit on Thursday, saying the government is unwilling to spend enough on the military at a time of “rising threats.” The resignation dealt another blow to embattled Prime Minister Keir Starmer, who is already facing demands from Labour colleagues to step down.
Healey told Starmer in a letter that the government’s Defense Investment Plan falls “well short of what is required at this dangerous time.”
Publication of the plan has been delayed amid reports of disagreement between the Defense Ministry and the Treasury.
Starmer has pledged to boost U.K. defense spending to 2.5% of gross domestic product by 2027 and 3% by 2035. But many in the military say that isn't fast enough.
“You have been unable, and the Treasury has been unwilling, to commit the resources that the nation needs to defend the country at this time of rising threats,” Healey wrote in his resignation letter.
He said that the spending plan put forward by the Treasury, and presented to him on Monday, would see defense spending rise to just 2.68% in 2030, after hitting 2.6% next year.
Healey said that isn't enough with growing demands on defense and British military commitments, citing the Iran war, Russia's all-out invasion of Ukraine and threats from Moscow.
“I am now left with no other option than to submit my resignation,” he said.
Gen. Richard Barrons, who helped lead a defense review that underpins the investment plan, said the government is “actively going backwards” by refusing to fund its own review.
“It diminishes the U.K.’s standing within NATO, weakens our credibility with allies, and increases our vulnerability to the realities of 21st century conflict,” he said. “Allies and adversaries alike will be paying attention.”
The government said it was delivering “the largest sustained boost to defense spending since the Cold War.”
“This country is safer because of the decisions Keir Starmer has made and we will continue to act in our national interest,” it said in a statement.
Healey has been U.K. defense secretary since the Labour Party government was elected in July 2024, and he's regarded as a capable and serious minister.
He has played a key role in bolstering international support for Ukraine and assembling a multinational coalition to help guarantee security if a ceasefire is reached. Healey also has helped spearhead a maritime security force that would help keep the Strait of Hormuz open to shipping if the Iran war ends.
The United Kingdom and other NATO member nations have faced pressure from U.S. President Donald Trump to increase military spending. Trump has long questioned the value of the military alliance and complained that the United States provides security to European countries that don’t pull their weight.
The U.K. military is also seeking to reverse years of decline in the face of an increasingly assertive Russia, which fully invaded its neighbor Ukraine on Feb. 24, 2022, and increasingly tests the defenses of European nations with overt and covert activity.
NATO Secretary-General Mark Rutte, informed of Healey's resignation by The Associated Press during a news conference in Brussels, said that Healey is someone “I respect very much.”
“What we are seeing all over the alliance is countries increasing their defense investments, and of course it is not easy, because in the end there is always a trade-off with other expenses, which are also important,” Rutte said.
Healey’s resignation is likely to further stoke talk that Starmer’s days as prime minister are numbered. Already bruised by a series of missteps since Labour returned to power less than two years ago, Starmer has faced calls within his party’s ranks to stand down.
In a sign of his waning authority, Starmer appears to have been unable to bridge the gap between Healey’s department and Treasury chief Rachel Reeves over defense spending.
Olivia O’Sullivan, head of the U.K. in the World program at the Chatham House think tank, said the resignation “significantly undermines Starmer,” especially since the prime minister has had “a relatively assured track record on defense and foreign affairs.”
Greater Manchester Mayor Andy Burnham is widely expected to challenge Starmer for the leadership, if he returns to Parliament in a June 18 special election.
Justin Crump, a former British tank commander who heads security consultancy Sibylline, said Healey's resignation “should not have been allowed to occur in a well-run government.”
“It just further underlines a lack of control here, a lack of clarity, a lack of resolution, a gap between words and delivery,” he said.
Associated Press journalists Mark Carlson in Brussels and Pan Pylas in London contributed to this report.
FILE - Britain's Prime Minister Keir Starmer, left, looks on as Defence Secretary John Healey speaks to apprentices and representatives in the defence industry, during a careers fair inside 10 Downing Street in central London, Monday March 3, 2025. (Adrian Dennis/Pool via AP, File)
Defence Secretary John Healey walks into the press conference following the AUKMIN Summit, at Lancaster House in London, Wednesday, June 10, 2026. (AP Photo/Kin Cheung, Pool)
Britain's Defence Secretary John Healey listens Australia's Minister for Foreign Affairs Penny Wong at a press conference following the AUKMIN Summit, at Lancaster House in London, Wednesday, June 10, 2026. (AP Photo/Kin Cheung, Pool)
John Healey, Britain's Minister of Defense arrives for a cabinet meeting inside 10 Downing Street in London, Tuesday, June 2, 2026. (AP Photo/Alberto Pezzali)
