The Middle East conflict has worsened the global outlook, with global growth revised down to 2.6% in 2026 and inflation pushed higher across advanced economies. Elevated energy prices and weak trade are constraining growth, while stretched public finances leave policymakers with limited room to respond.
Download the full Q2
UK economic summary
Key global trends
1. Geopolitics are locking in slower growth and higher inflation
2. Exposure is uneven, with fragile economies most at risk
Economies with fiscal, current‑account and energy deficits face rising risks of capital outflows, inflation and recession, particularly across parts of the GCC and Asia. In contrast, some commodity exporters, notably in Latin America, are better positioned to absorb the shock.
3. A global cost shock is pressuring firms, consumers and markets
Higher energy and input prices are driving a cost‑push shock at a time of weak demand and tight financial conditions, raising insolvency risks in 2026. Markets have moved into a stagflation‑risk, volatility‑prone regime, with only a temporary easing expected under the baseline scenario.
Want the full global outlook? Read the report here:
Economic outlook 2026-27 The Fog of War
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