Impact of Middle East War on Global Economy and AI Investment
An extended period of elevated oil prices due to the war in the Middle East could hinder the growth of artificial intelligence (AI), the World Trade Organization’s (WTO) chief economist has cautioned.
The conflict and its effects on energy and fertiliser costs represent the primary risk to the global economy, according to the WTO’s latest Global Trade Outlook report.
Additionally, the Geneva-based organization expressed concerns regarding the sustained momentum of AI investment, which in 2025 helped to counterbalance the adverse effects on global trade caused by tariffs imposed during Donald Trump’s administration.
“There is an interesting possible interaction between the Middle East conflict and the AI boom, in part because the boom is very energy-intensive,” said the WTO’s chief economist, Robert Staiger. “If the price of energy continues to be elevated for the whole year, that could put a crimp on the AI boom.”
He added: “Because that investment is very concentrated in a number of very large firms, and the technology is still ultimately unproven in terms of how much it can deliver, there is a bit of uncertainty there in terms of where the future’s going.”
Significance of AI Investment in North America
Highlighting the sector’s importance, the WTO estimated that about 70% of all investment growth in North America during the first three quarters of the previous year was attributed to AI-related goods. For comparison, in the three years preceding the 2008 US housing market crash, property accounted for 30% of investment growth.
Trade Growth Despite Tariffs and Outlook for 2026
Despite the protectionist policies of former President Trump, which raised US tariffs on numerous goods to their highest levels in decades, global trade in goods grew by a robust 4.6% in 2025, the WTO reported. This growth was supported by strong export performances from Asian economies.
Even without a prolonged energy shock, the WTO projects that the growth rate of global goods trade will slow significantly in 2026, declining to 1.9%.
However, the WTO indicated that a sustained period of high energy prices over a year could reduce goods trade growth by an additional 0.5% and threaten food security.
“Risks to the forecast are tilted to the downside, and are mostly linked to the conflict in the Middle East through higher energy prices, which could weigh heavily on output and trade unless they are short-lived,” the report stated.
“Given that the Gulf region is a major exporter of both energy and fertilisers, a prolonged interruption in supply could ripple across food systems, exacerbating the effect of pre-existing export restrictions,” it added.
Challenges for WTO Amid Changing Global Trade Dynamics
The WTO has faced difficulties in maintaining its influence during Trump’s second term, as the US administration implemented a series of tariffs that often disregarded the organization’s rules. Additionally, competing economies have breached their commitments by entering into agreements with Washington outside the WTO framework.
