Global economic growth is projected to slow, with 2026 GDP lower and inflation higher in most economies, under two scenarios for a potential Middle East war causing an energy price spike. The first scenario sees oil prices surge to around $120 per barrel for one year, alongside sharp increases in liquefied natural gas, refined petroleum, and fertilizer.
The second scenario posits elevated energy prices for three years. Both scenarios indicate uneven effects, with countries dependent on Middle Eastern oil, natural gas, and fertilizers experiencing the largest GDP declines and inflation increases. Emerging economies are generally hit harder than advanced economies due to higher fertilizer costs impacting agricultural production. The US economy is among the least affected, with 2026 GDP around 1.2 percent lower, particularly impacting transportation, agriculture, and durable manufacturing. China's 2026 GDP is projected to be around 1.8 percent lower, despite its domestic energy and fertilizer supplies, as slowing global demand weakens its exports.
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