According to Fitch Ratings in their latest Global Economic Outlook (GEO), the ongoing oil crisis triggered by the US-Iran conflict has adversely affected global growth projections. As a result, Fitch has revised its forecast for world economic expansion in 2026 downwards by 0.2 percentage points, bringing it to 2.4%.
The downward revisions in forecasts have been widespread, primarily due to rising inflation that is constraining real wages, suppressing consumer spending, and increasing the costs for businesses. However, the adverse effects of the oil crisis on global economic activity are being mitigated by unexpectedly strong growth in investments related to artificial intelligence (AI), which is bolstering international trade and exports from Asia.
Since the March GEO report, growth forecasts for the United States and the eurozone have been reduced by 0.3 and 0.4 percentage points, respectively, now standing at 1.9% and 0.9%. For emerging markets, excluding China, the growth forecast has been adjusted downwards by 0.2 percentage points to 3.2%, while China’s outlook has improved by 0.3 percentage points to 4.6%, following unexpectedly positive data from the first quarter of 2026 and strong export resilience. Additionally, South Korea’s growth forecast has been upgraded due to favorable export conditions driven by the surge in global technology investments.
Brian Coulton, Chief Economist at Fitch, stated, “The oil price shock is negatively impacting global growth expectations and increasing risks to the downside. However, we are experiencing a significant boom in global IT spending, which is buffering the effects of this crisis on economic activity in the short term, particularly in Asia.”
The closure of the Strait of Hormuz has now persisted for 14 weeks, with expectations that it will not reopen until July. Consequently, Fitch has adjusted its average price forecast for Brent crude oil in 2026 from USD 70 per barrel to USD 87 per barrel. While the oil crisis presents a considerable challenge to global growth, the current situation is not as severe as the oil shocks experienced in the 1970s, when real oil prices peaked at USD 170 per barrel in 1979. Since 1980, oil consumption as a percentage of global GDP has halved.
Nonetheless, given the high level of geopolitical uncertainty, Fitch has also considered a negative scenario in which oil prices average USD 100 per barrel in 2026. In this scenario, equity markets may decline by 10%, and credit conditions could tighten, leading to projected growth rates of just 0.8% for the US, 0.3% for the eurozone, and 3.4% for China over the next year.
In the first quarter of 2026, IT investment in the US grew by 18% year-over-year, with indications of rapid growth in IT investments globally. Sales of semiconductors surged by 80% year-over-year in March, contributing significantly to the tech boom and global trade. US imports of capital goods increased by nearly 30%, while strong semiconductor exports played a crucial role in the robust GDP growth observed in Korea and Taiwan, and technology products have further stimulated trade in China.
Fiscal policies are expected to provide some support to US growth this year, even as the deficit widens compared to 2025. It is estimated that defense spending will contribute approximately 0.8% to Germany’s GDP cumulatively over the next three years.
The inflationary effects of the oil crisis are reshaping the global monetary policy landscape. With the recent memory of post-pandemic inflation still fresh, central banks are wary that the price shock could have lasting effects and are focused on maintaining credibility and managing expectations. However, current policy rates are significantly higher than they were in 2021, labor market conditions and wage pressures are easing, and fiscal policies are much less expansionary.
Fitch anticipates that the US Federal Reserve and the Bank of England will maintain their interest rates this year but will likely begin to lower them in 2027. The European Central Bank is expected to raise rates by 25 basis points in June, although this increase may be reversed next year.
