Oil crisis precipitated by the US-Iran War has hurt global growth prospects and has led to lowering of 2026 forecast for global growth by 0.2pp to 2.4%, according to Fitch's Global Economic Outlook June 2026.
Global Economic Outlook – June 2026 released on 4 June 2026 said the forecast cuts have been widespread as higher inflation squeezes real wages, dampens consumption and raises companies’ input costs.
It said but the impact of the oil shock on global activity is being cushioned by stronger-than-expected momentum in AI-related IT investment, supporting world trade and Asian exports.
Fitch Chief Economist Brian Coulton said, “The oil price shock is hitting world growth prospects and increasing downside risks. But we are also amid a very pronounced boom in global spending on IT and that is cushioning the impact on activity in the near term, particularly in Asia.”
According to the Outlook, the closure of the Strait of Hormuz has now lasted 14 weeks and it appears that it will not start to reopen until July.
The rating agency has also revised its 2026 average price assumption for Brent crude to $87 a barrel from $70 a barrel in the March GEO. The oil shock is a strong headwind to world growth, but the agency said its base case is far less severe than the pernicious oil shocks of the 1970s. Oil consumption as a share of world GDP has halved since 1980.
“Nevertheless, with geopolitical uncertainties remaining high, we also examined an adverse scenario where oil prices average $100 a barrel in 2026, equity prices fall by 10% and credit conditions tighten. Growth in the US could fall to just 0.8% over the next 12 months (i.e. through the year to 1Q27) in this scenario, to 0.3% in the eurozone and 3.4% in China.”
The inflationary impact of the oil shock is shifting the outlook for global monetary policy. With the memory of the post-pandemic inflation still recent, central banks have concerns that the price level shock could lead to more persistent impacts and are keen to demonstrate credibility and anchor expectations. But policy rates are much higher than in 2021, labour market conditions and wage pressures are softer, and fiscal policy far less expansionary.
Fitch now expects the US Federal Reserve and the Bank of England to hold rates this year but to resume cuts in 2027. The ECB will raise rates by 25bp in June, but we expect that to be reversed next year.