How High Oil Prices Under Middle East Conflict Impact Global Trade: Here's How the WTO Calculates It

March 21, 2026

Word count: 2,331, approximately 4-minute read

Author | First Financial Feng Difan

The latest WTO “Global Trade Outlook and Statistics” report suggests that the Middle East conflict could impact global trade through multiple channels: not only causing oil prices to rise and slowing global GDP growth, but also leading to fertilizer shortages and increased costs, thereby threatening food security in vulnerable economies.

WTO Chief Economist Robert Staiger explained the WTO’s estimation logic at the report release event: if high energy prices persist for the rest of this year, global GDP growth is expected to be revised downward from the baseline forecast of 2.8% in 2026 to 2.5%, with a rebound starting in 2027.

“Additionally, we forecast this factor will also lower the baseline forecast for merchandise trade volume growth in 2026 by 0.5 percentage points, down to 1.4%. It will then rebound to 2.8% in 2027, as our model assumes oil prices will ease by then,” he said.

He also noted that the WTO’s forecasts incorporate an “alternative scenario” that specifically considers the potential impact of the Middle East conflict on energy prices, assuming the conflict keeps energy prices high throughout the year. The specific assumptions are that crude oil prices will stay at $90 per barrel, and liquefied natural gas (LNG) prices at $16 per million British thermal units, reflecting actual market prices as of March 10 this year.

Source: WTO

Are the forecasts too conservative?

Staiger mentioned that in making predictions, the WTO faced another unexpected shock—the Middle East conflict. As a result, the WTO issued a “baseline” forecast that does not explicitly include the impact of the conflict; however, it also provided an “adjusted” forecast that aims to comprehensively reflect all effects of this shock.

In short, under the baseline scenario, the WTO predicts a 1.9% growth in global merchandise trade in 2026, while the adjusted forecast considering the conflict’s impact shows a growth of 1.4%.

The trend in global commercial services trade shows a similar pattern, though its annual growth fluctuations are relatively smaller because service trade tends to be more stable than merchandise trade. He explained, “In our baseline scenario, we forecast global service trade growth of 4.8% in 2026, rising to 5.1% in 2027. If energy prices remain high throughout the rest of this year due to the Middle East conflict, we expect the growth rate of global service trade in 2026 to fall to 4.1%, then rebound to 5.2% in 2027.”

However, a common question is that oil prices have already surpassed $100. On the day of the briefing, Brent crude oil surged to $116 per barrel.

“In this situation, some might ask whether our forecasts are already too conservative or even too low,” Staiger said. “I want to emphasize that energy prices are always volatile on any given day. For us, short-term daily fluctuations are not the key concern.”

He explained that the WTO economists conducted robustness tests on the “average level” of oil prices for 2026.

“These tests explore how our forecasts would change if assumptions about oil and gas price trends shift—for example, if prices do not stay constant throughout the year but spike briefly for a few months and then fall back. We believe our forecasts remain robust under such scenarios,” Staiger said. “If energy prices spike more sharply and stay high for a longer period, our current assumptions may no longer be valid. We may need to reassess or update our forecasts in the coming months.”

“But for now, we believe our assumptions are appropriate and reassuring,” he added.

If oil prices stay high, European trade could suffer

According to the WTO’s model, if energy prices remain high, Europe’s merchandise exports could shrink by 0.6% this year, compared to a baseline growth of 0.5%.

European industry is particularly sensitive to high energy prices due to its heavy reliance on natural gas imports. During the previous energy crisis triggered by the Russia-Ukraine conflict in 2022, energy-intensive industries in Europe had to significantly cut capacity.

A senior commodities research analyst told reporters that in a high oil price scenario, Europe faces three impacts: first, high oil prices are a global phenomenon; second, high gas prices are common to Europe and Asia; third, high electricity prices are mainly a European issue.

He explained that in Europe, about 60% of electricity prices are determined by natural gas prices. In most Asian countries, electricity prices are primarily set by coal or even solar power, with natural gas playing a smaller role. In simple terms, Asia is affected by two of the three channels, the U.S. by one, and Europe by all three.

A recent report from Bloomberg Economics estimates that about one-third of current oil prices are due to the conflict. If the conflict persists at a lower intensity, with short-term disruptions in the Strait of Hormuz, the risk of sustained high prices could keep oil around $110 per barrel until the second quarter, then fall back to $80. This would result in U.S. inflation being raised by about 0.7 percentage points, and inflation in the Eurozone and the UK by nearly 1 percentage point, reflecting their higher dependence on natural gas.

Meanwhile, Europe’s liquefied natural gas supply disruptions have pushed prices from around €30 per MWh to about €60 per MWh, still well below the peak of over €300 during 2022.

According to the WTO model, in scenarios with high energy prices, fuel-importing regions like Asia and Europe will see the largest downward revisions in import growth compared to baseline scenarios; whereas fuel-exporting economies with remaining export capacity are generally expected to see higher income and stronger import growth.

The WTO also warned that the Middle East conflict threatens key global shipping corridors. Shipping traffic through the Strait of Hormuz has plummeted from 138 ships per day to nearly zero. The region accounts for 7.4% of global transport service exports and is a crucial hub connecting Europe, Asia, and Africa. The disruption has led to over 40,000 flight cancellations and increased transportation and insurance costs.

The WTO states that while a short-term conflict-induced disruption might be temporary and quickly recover, prolonged crises could lead to structural increases in fuel and transportation costs, shrinking transit businesses and shifting global travel and trade patterns to alternative routes.