West Asia Conflict May Lower Global Growth Forecast for 2026

Standard Chartered Global Research (SC Global Research) has revised down its global economic growth forecast for 2026 to 3.0 percent, from a previous estimate of 3.4 percent. This adjustment is primarily attributed to the ongoing conflict in West Asia, which is exerting pressure on the global economic outlook.

The firm, however, anticipates that global growth will stabilize in the latter half of the year, as risks associated with the conflict are perceived to have reached their peak. "We remain cautious about several lingering risks, including uncertainty surrounding the duration of a ceasefire and the global energy supply recovery," SC Global Research stated in a research note. While the reopening of the Strait of Hormuz has eased one major obstacle to economic growth, the recovery of energy flows still faces uncertainties.

US tariff issues continue to weigh on the global economy. "Although attention to tariffs has decreased in recent months due to the West Asian conflict and still-strong global trade, the US administration continues to pursue Section 301 tariff actions against several trading partners and signals the possibility of additional tariff measures," the report noted.

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We remain cautious about several lingering risks, including uncertainty surrounding the duration of a ceasefire and the global energy supply recovery.

SC Global Research highlighted that the global economy has performed better than expected, despite experiencing the largest energy supply shock in history. Asia, particularly Northeast Asia, has recorded robust growth this year, driven by artificial intelligence (AI) related demand. This resilience is notable given that approximately 80 percent of oil exports previously passed through the Strait of Hormuz towards this region.

The research also pointed out that inflation has risen in some economies not implementing subsidies or price controls. However, concerns about slowing economic growth and significant shortages of energy and industrial materials have not materialized. The reopening of the Strait of Hormuz has reduced the risk of uncontrolled market reactions due to dwindling oil reserves. While the recovery of oil supply from West Asia could boost market confidence, the delayed impact of higher energy prices is expected to continue pressuring growth in the second half of the year. The firm cautioned that current peace agreements remain temporary, and any negative developments in the Strait of Hormuz could reintroduce the risk of sharp downturns, especially with global oil reserves at low levels.

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Although attention to tariffs has decreased in recent months due to the West Asian conflict and still-strong global trade, the administration continues to pursue Section 301 tariff actions against several trading partners and signals the possibility of additional tariff measures.