Economic and financial risk insights:
Middle East conflict will weigh on global growth and raise inflation
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We expect global growth of 2.5% in 2026, revised down from 2.8% pre-crisis. The temporary ceasefire raises the likelihood of our forecast revisions, but the energy supply disruptions will take months to normalise and re-escalation could still lower growth further. Initial US-Iran negotiations ended without a result, highlighting major obstacles to agreement. After six weeks of conflict, economic impacts are visible in higher input costs, supplier delays and weaker confidence.
We now expect 2026 global inflation of 3.8%, up from 3% expected pre-crisis. Risks are to the upside, if energy supply disruptions last beyond April. The shock is driving price increases beyond oil and gas, with disruptions in for example petrochemicals, aluminium and fertilizers. This will particularly lift construction costs and motor inflation.
With longer-term inflation expectations still firmly anchored, most central banks are likely to respond to rising inflation with guidance rather than actions.