New Delhi: Global trade growth is set to slow sharply in 2026, with the World Trade Organization (WTO) saying the key downside risks will be the ongoing war in West Asia and rising energy prices (WTO).
Growth in the volume of world trade in goods is expected to fall to 1.9% this year from a stronger-than-expected 4.6% in 2025, before recovering to 2.6% in 2027, the WTO said in its Global Trade Outlook released on Thursday.
The report warned that in an adverse scenario, global trade growth could slow further to 1.4% if energy prices remain elevated due to prolonged geopolitical tensions. That would mean a slowdown from 4.7% expansion in 2025 – faster than global GDP growth of 2.9% – driven largely by demand for AI-related goods and durable consumption in emerging markets.
The WTO report identified conflict in West Asia as a key risk and noted that sustained high oil prices could reduce goods trade growth by 0.5 percentage point in 2026.
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The disruption to oil supplies through the Strait of Hormuz – which accounts for about 20% of global liquid oil consumption – has already pushed up oil prices and raised costs in transport, manufacturing and agriculture.
The WTO report also pointed to sharp disruptions to maritime transport in the region, with vessel movements on key routes dropping significantly, underscoring the severity of the supply shock.
However, Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), a think tank, pointed out a key limitation: projections are largely in volume terms.
“Global trade is ultimately measured by value, and price movements – particularly in energy, technology and shipping – now play an equally important role,” Srivastava said. “The absence of forward-looking value forecasts leaves policymakers with an incomplete picture and risks overlooking both emerging risks and opportunities.”
She flagged the risks fertilizer supply chains, with the Gulf region being a major exporter of inputs such as urea and ammonia, with about one-third of global supply passing through the Strait of Hormuz. “Disruptions to the fertilizer trade could have wider impacts on agricultural production and food security,” the report said.
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India is among the exposed economies, with around 40% of its urea imports coming from the Persian Gulf, making it vulnerable to supply disruptions and price fluctuations.
“For India, the risks are immediate – heavy dependence on fertilizers in the Persian Gulf (about 40% of urea imports) and exposure to oil and disruption to shipping through the Strait of Hormuz. At the same time, India remains a bright spot in services with growing export orders,” Srivastava said.
“The broader message is clear. Business values may remain high, but the system behind them is increasingly fragile and increasingly shaped by geopolitics rather than economics.”
Also compromised services
The impact is also expected to extend to trade in services, which is expected to moderate to 4.8% in 2026 from 5.3% in 2025. In a downside scenario, growth could slow further to around 4.1%, reflecting disruptions in transport, logistics and travel.
Services could face a sharper relative impact than goods because of the Middle East’s role as a global transit hub, the WTO said.
“A prolonged phase of high energy prices could slow the pace of recovery in global demand,” said Abhash Kumar, a trade expert and assistant professor of economics at Delhi University. “Going forward, a lot will depend on how supply chains stabilize in West Asia. If the outages continue, businesses can gradually diversify sources and shipping routes, although this could mean some cost increases and efficiency adjustments in the near term.”
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Global GDP growth is projected at 2.8% in 2026, roughly in line with trade growth, signaling a weakening of the traditional relationship where trade grows faster than output.
Higher energy costs could also push up inflation and delay monetary easing in several economies, further weighing on demand.
Asian economies are expected to remain key drivers of world trade, with export growth expected to reach around 3.5% in 2026, according to a WTO report. In 2025, Asia accounted for about 71% of global trade growth, supported by strong export performance and demand for technology products.
Despite the risks, the WTO said continued strong investment in AI-related goods could partially offset the slowdown. “AI-related demand accounted for a significant share of trade growth in 2025 and could continue to support trade flows,” the report said.
India’s total exports in FY25 stood at $437.70 billion, a marginal increase from $437.07 billion in FY24, indicating a largely stagnant growth trend amid evolving global trade conditions.
