Global Macro Outlook: Second Quarter 2026

Geopolitical tensions, particularly in the Middle East, emerged as the primary driver of financial markets in the first quarter, overshadowing economic fundamentals. While expanding conflicts raise concerns about potential stagflationary oil price shocks, our base case anticipates continued global economic resilience.

We expect a moderate upward revision to inflation forecasts and a slight downward adjustment to growth projections due to energy price volatility. However, the underlying growth dynamics appear stable, suggesting the economy can absorb these shocks.

The response of monetary policy will hinge on central bank mandates and the ultimate economic impact of ongoing conflicts. Persistent higher energy prices remain the key risk to economic growth, but current conditions suggest a manageable outlook.