Economic and financial risk insights:
Middle East escalation shortens path to tail risk scenarios
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Our forecast scenario ranges reflect weaker growth amid the Middle East conflict. The impact will depend on the severity and duration of the energy supply shock: we estimate global GDP growth would be 0.2 to 0.3 ppts lower in 2026 if the oil price (Brent) stays near its average of USD 90 since the crisis began (+50% YTD) for the rest of the year. Its current level is not historically extreme: in real terms, it has been higher 30% of the time over the past 30 years. Global recession risks would only rise if the price shock intensifies – with oil sustained above USD 120 – and triggers a non-linear deterioration in financial conditions and sentiment (Figure 1). But two weeks into the crisis, we expect full-year global growth in 2026 to hold up, albeit at lower rates than previously assumed.
Figure 1: GDP impacts from oil shock relative to baseline
Source: Swiss Re Institute