Global growth under pressure as energy shock renews inflation risks and heightens uncertainty
Global economic growth is slowing due to energy price shocks and geopolitical tensions in the Middle East. While AI-related investments have provided some economic support, rising inflation has forced central banks to maintain higher interest rates.
Why it matters
The combination of high energy costs and restrictive monetary policy threatens to dampen global economic recovery and increase financial strain on public budgets.
22 September 2026 - The crisis in the Middle East has dealt yet another blow to a world economy already grappling with the lingering effects of recent shocks, heightened geopolitical and trade tensions, and shrinking fiscal space. A severe global downturn has so far been avoided, but growth remains subdued and risks are substantial.
Global growth is now projected at 2.6 per cent in 2026 and 2.9 per cent in 2027, slightly below forecasts at the start of the year and well below the pre-pandemic pace of 3.2 per cent. The energy shock has also reignited inflationary pressures. Brent crude has risen by about 40 per cent since February to around $100 per barrel, while diesel, jet fuel, and heating oil prices have increased even more sharply.
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