Whalesbook
Global Trade Growth Forecast Slashed
The World Trade Organization's latest outlook projects global merchandise trade volume growth to fall to 1.9% in 2026, a sharp drop from an estimated 4.6% in 2025. Services trade growth is also expected to slow, easing to 4.8% from 5.3% in the previous year. This forecast contrasts sharply with 2025, when global goods and services trade expanded by approximately 4.7%, growing faster than world GDP growth of 2.9%.
West Asia Conflict Heightens Trade Risks
The main driver for this forecast downgrade is escalating geopolitical risks in West Asia. Sustained high oil prices, resulting from regional instability, could reduce merchandise trade growth by 0.5 percentage points. The impact on services trade is anticipated to be more severe, potentially lowering growth by 0.7 percentage points, mainly due to strain on international transport and travel.
Strait of Hormuz Disruptions Intensify
Disruptions in the Strait of Hormuz are creating a critical bottleneck. Ship traffic through this key waterway has fallen from about 138 vessels daily to almost zero since the conflict intensified. This situation is increasing energy prices and also raising transport and insurance costs, adding to wider inflation pressures across global supply chains. The blockade affects more than just energy, impacting non-energy trade like fertilizers, as about one-third of global fertilizer exports normally pass through the Strait of Hormuz. The WTO warns a prolonged conflict could permanently increase fuel and transport costs, disrupt major shipping and air routes, and sharply reduce demand for tourism and global travel. As a result, West Asia is expected to see its services exports shrink by 9.2% in 2026, reducing expected global services export growth by 15.7 percentage points.
AI Trade Offers Potential Boost
Despite these challenges, the report notes a potential upside: continued strong trade in Artificial Intelligence (AI) goods. This sector significantly boosted trade in 2025, counteracting the impact of higher tariffs and trade policy uncertainty. If AI-related demand continues, it could help cushion the projected slowdown, though overall uncertainty remains high. The WTO's outlook suggests trade growth may align more closely with GDP growth in the future, indicating a less dynamic global economic environment.