Learn Italian: Quella è stata la situazione peggiore.

Peggiore is the irregular comparative of cattivo (bad), so it translates to "worse". However, in Italian, you create the "relative superlative" (meaning "the worst" out of a group) simply by combining the comparative with a definite article like il or la. Because it is paired with la situazione, peggiore means "the worst".

Does peggiore change its ending depending on the gender of the noun?

No. Because peggiore ends in -e, it works for both masculine and feminine singular nouns. You would say la situazione peggiore (feminine) just like you would say il momento peggiore (masculine). It only changes in the plural, where it becomes peggiori.

Why is the past tense è stata instead of è stato?

In the past tense (passato prossimo), the verb essere (to be) uses itself as a helping verb. Whenever a verb uses essere as a helper, the past participle ending must match the subject in gender and number. Since la situazione (and the pronoun Quella) is feminine singular, stato becomes stata.

Why do we use Quella at the beginning of the sentence instead of Quello?