West Asia Tensions Push Global Economy Toward Crisis, UNCTAD Issues Grave Warning

Kathmandu. Growing geopolitical tensions in West Asia have created severe pressure on the global economy. The United Nations trade and development body UNCTAD has warned that this could have a devastating impact on global economic growth.

According to UNCTAD, the energy crisis stemming from Middle East tensions has pushed the world economy into great risk. As a result, global economic growth is projected to slow from 2.9 percent last year to 2.6 percent in 2026.

Pressure from Rising Energy Prices

According to UNCTAD's latest Trade and Development Report, the conflict in West Asia has destabilized energy markets, negatively affecting global growth. The report estimates that global trade in goods and services will grow by 4 percent this year in real terms. However, much of this projected growth is expected to come from higher energy costs.

This projection comes amid concerns over rising geopolitical risks, shifts in global trade patterns, and financial risks linked to the rise of artificial intelligence (AI). The report states, "In 2026, Asia is expected to contribute 59 percent to global economic growth."

This shows Asia's critical role in supporting global growth even amid the pressures of the West Asia crisis and rising energy prices.

Changing US-China Trade Dynamics

The report highlights the major shift in trade patterns caused by ongoing tensions between the US and China. According to UNCTAD, trade between China and the US has fallen by more than 20 percent since 2024. In contrast, East Asia has expanded trade with both China and North America.

The agency warned that restrictions on trade and investment are making it increasingly difficult for new companies to enter strategic sectors. Export controls, investment screening, and supply chain complexities are limiting access for new entrants.

AI Poses Risks to Financial Stability

In addition to energy prices and US-China tensions, UNCTAD pointed out that the growing use of AI brings both business opportunities and financial risks. AI-related products, including semiconductors, have emerged as key drivers of goods trade. However, the report concludes that growth in AI-related trade does not automatically translate into broader economic growth.

The report also warns that the growing popularity of AI could pose risks to financial stability, as markets become increasingly dependent on a few companies. However, the agency did not disclose the names of those companies. –Agency