Shock and resilience: These are, once again, the key words of the first half of 2026. In 2025, the global economy had already faced the US tariff shock (less severe than initially feared) and demonstrated remarkable resilience. Today, faced with the new energy shock caused by the conflict in Iran, how resilient is the global economy?
First, it is necessary to recall how the economic outlook changed. Early 2026, it was expected that the factors that had contributed to the resilience of the global economy in 2025 would persist and continue to support growth, while keeping inflation contained.
These specific conditions were as follows: low oil prices, contributing to controlled inflation, favorable monetary and financial conditions, the AI boom, the European pivot with the increase – initiated – in European defense spending and the launch of Germany’s massive investment plan.
The conflict in Iran has undermined the first of these conditions and, with it, the favorable scenario that we were expecting until then. With the energy shock, the global economy suddenly faced a risk of stagflation-like situation: growth forecasts have been revised downward and inflation forecasts upward.
It is too early to draw a full assessment of the impact of this shock, but in a first analysis, its effects appear to have been cushioned.
A full assessment is premature as the shock is not yet completely behind us. The Memorandum of Understanding reached in mid-June between the United States and Iran is good news. But uncertainties remain numerous and not all tensions have disappeared.
We also do not have, at the time of this video, the second-quarter growth figures, which will make it possible to better assess the scale of the impact on the various components of GDP. We nonetheless have a first idea of this scale through confidence surveys and monthly unemployment rate data at our disposal, as well as through the reaction of financial markets.
The resilience mentioned earlier is partly based on the near-immunity of equity markets and the US dollar. Between the day before the outbreak of the conflict in Iran and the day before the announcement of the MoU, the S&P 500 shows an increase of 8%. And if the US dollar has appreciated, benefiting from its safe-haven status during periods of rising risks, this appreciation has remained limited (+2% in effective exchange rate terms and also against the euro).
On the other hand, bond markets reacted more strongly, with a rise in yields, more pronounced in the US than in Europe (+50 basis points for the 10-year US yield compared to +35 for the German Bund). If this is for a part a sign of the inflationary impact of the energy shock on both sides of the Atlantic, on the American side there is also a more favorable cyclical dynamic (and, in the background, larger fiscal imbalances as well).
Regarding economic indicators, around the world, the business climate in the manufacturing sector has held up relatively well against the energy shock.The business climate in the services sector and consumer confidence were, however, more visibly impacted in March-April, but this impact appears to have been short-lived given signs of recovery in May and June. On the labor market side, the downward trend in the US unemployment rate and its stability, or even decline, in the Eurozone is another encouraging sign.
The overall dampened effects of the energy shock on activity are for a large part due to another shock, this time a positive one, which continues to support activity, global trade and stock markets: namely, the AI boom. To this wave of investments is added another, smaller in scale for now but whose early signs also support European growth: the increase in military spending and the implementation of the German investment plan.
On the inflation side, its rise was immediate and quite significant between March and May in the wake of the sharp increase in oil prices. But it has also already followed them downwards in June. Will this decline in inflation continue, to what extent and at what speed? This will be one of the major questions of the second half. In our view, the inflation risk has only decreased, it has not disappeared. Inflation is expected to go less high, but disinflation should remain limited.
And if there is less inflation, will the expected signs of growth strengthening, particularly in Europe, also materialize? This is, in any case, our scenario.
Finally, this inflation-growth combination raises a third key question: what the major central banks will do. For the Bank of Japan, the case is closed: conditions are met for further rate hikes.
For the US Federal Reserve, conditions also appear to be in place for it to tighten monetary policy, with the debate focusing on the timing of the first rate hike. We anticipate it in December, but it could occur earlier.
For the European Central Bank and the Bank of England, the question is different: it is whether the rate hike we anticipate will indeed take place, depending on the scale of disinflation. Response in the coming months. Thank you for your attention and for watching this new issue of EcoTV.
