World economy in summer 2026: Iran war still weighs on growth

Klaus-Jürgen Gern, Stefan Kooths, Johanna Krohn, Wan-hsin Liu and Jan Reents

No 133, Kiel Institute Economic Outlook from Kiel Institute for the World Economy

Abstract: In the spring of 2026, global growth slowed amid rising energy prices and heightened geopolitical risks,. While production in the Persian Gulf countries has slumped, the economy remained firmly on an upward trajectory in most other countries. In the United States in particular, the economy is expected to continue expanding at a largely unchanged pace. Positive momentum continues to come from the boom in AI technology, which is providing strong impetus for trade and investment. Currently, financial markets appear to continue expecting that oil and gas production and transportation in the Gulf region will soon return to normal levels. In this scenario, which is also underlying our forecast, the consequences for the global economy will remain limited, the rise in inflation temporary, and the monetary policy response moderate. However, as the conflict has now lasted significantly longer than expected in March, we have reduced our forecast for global output growth-measured in terms of purchasing power parity-for this year from 3.1 percent to 2.8 percent. For the coming year, a rebound to 3.3 percent is then expected (March forecast: 3.2 percent). The main risk to this forecast is a prolonged closure of the Strait of Hormuz meaning that oil supplies remain at their current sharply reduced levels for a significantly longer period of time, which would lead to a much more severe and prolonged slowdown in the global economy.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/341657/1/1972978594.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkeo:341657

Access Statistics for this paper

More papers in Kiel Institute Economic Outlook from Kiel Institute for the World Economy Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().