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Q2 2026

Heightened tensions in the Middle East are reinforcing a volatile economic backdrop, marked by slower growth, renewed inflation pressures and tighter policy constraints. Globally, growth is expected to slow in 2026, with higher energy costs weighing on trade, consumer sentiment and corporate margins.

For the UK, this translates into a geopolitical stagflation scare: while the baseline remains one of modest growth, rising energy prices, a late inflation peak and higher‑for‑longer interest rates have significantly narrowed the margin for error for households and businesses alike.

 

Download the full Q2
UK economic summary

Key global trends

1. Geopolitics are locking in slower growth and higher inflation

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.

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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Allianz Trade is the global leader in trade credit insurance and credit management, offering tailored solutions to mitigate the risks associated with bad debt, thereby ensuring the financial stability of businesses. Our products and services help companies with risk management, cash flow management, accounts receivables protection, Surety bonds, Business Fraud Insurance,  debt collection processes and  e-commerce credit insurance ensuring the financial resilience for our client’s businesses. Our expertise in risk mitigation and finance positions us as trusted advisors, enabling businesses aspiring for global success to expand into international markets with confidence.

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