Overall, based on data available through September 2026, economic activity continues to show resilience. The high levels of business climate surveys illustrate this well. Household confidence, however, is more vulnerable and sensitive to energy price pressures. Financing conditions in emerging economies also continue to hold up well against the shock (much better than in 2022) as well as against the tensions in DM bond markets.
The overall picture from the confidence surveys available for September is globally positive. According to the PMIs, the business climate in services has indeed seen a clear improvement, and that in the manufacturing sector remains comfortably in expansion territory for the 8th month in a row. However, household confidence has recorded its first decline in 5 months, likely driven by rising inflation and concerns over purchasing power.
US macroeconomic performance has remained solid since the onset of the shock, as illustrated in particular by Q2 growth of +3.8% and +9% (annualized quarterly rate) in consumer spending and private nonresidential investment, respectively. In the manufacturing sector, business sentiment has gained momentum despite the shock, while the impact of this shock on the services sector has remained very limited. The immediate reaction of consumer confidence was, however, more negative before beginning to improve, which was nevertheless interrupted in August.
The average CPI inflation rate across the fifteen leading emerging economies stabilised at 4.3% year-on-year in August. The inflationary impact remains weaker than in 2022, due in particular to reduced spillover effects on agricultural and food prices. Manufacturers’ views on the trend in input and finished product prices have returned to their pre-conflict levels.
Oil and gas markets rose in September, primarily due to the resurgence of significant disruptions to hydrocarbon traffic in the Gulf. Red Sea flows have been constrained, while the substantial oil exports through the Strait of Hormuz remains fragile. In variation, the current rise in oil and gas prices exceeds the one recorded during the 2022 crisis, although in value, gas prices remain significantly lower than in 2022.
In Europe, the possibility of a US ban on diesel exports has heightened concerns about price trends for this widely used fuel, which has already risen significantly since the outbreak of the conflict in Iran. It has become a major political issue on both sides of the Atlantic in the run-up to decisive elections.
The 2026–2027 El Niño climate event is expected to be one of the most intense in the last fifty years, with sea-surface-temperature anomalies potentially exceeding +3°C in the equatorial Pacific. According to the World Meteorological Organisation (WMO), El Niño is expected to persist until February 2027, with asymmetrical effects, as South-East Asia and northern Latin America will experience droughts, while southern Brazil and Argentina could see heavy rainfall. Above all, El Niño is compounding the effects of global warming and exacerbating existing extreme-weather events (droughts, floods and heatwaves). The economic effects of this climate shock mainly play out through three avenues: agricultural commodity prices, energy and logistics.
“Germany is too dependent on the US for its security, on Russia for its energy and on China for its exports.” That was, in essence, Brookings’ Constanze Stelzenmüller’s diagnosis in June 2022, and it was – and is – valid as well for Europe as a whole. But does this dependency also apply to technological and industrial products? The European Commission’s EXternal Vulnerability Index (EXVI) answers that very question, mapping out the EU’s exposure to foreign supply chains.
Overall, based on data available through August 2026, the inflationary impact and the negative effect on activity of the current energy shock remain significantly lower than the 2022 shock. Due to renewed tensions in the conflict in Iran and, consequently, on hydrocarbon prices, inflation is moving up again, but still in a limited way for now and driven solely by energy prices. Overall, confidence surveys do not show any signs of these negative trends.
In the Eurozone, the overall picture from the data available for August is positive in terms of confidence surveys and reinforces the encouraging signs seen in previous months. According to PMI surveys, inflationary pressures continue to ease, while supply-side tensions have stabilised. Business sentiment in the services sector remains stable, anchoring its previous gains, while confidence in the manufacturing sector shows a further—and marked—improvement. Another notable and encouraging development is the recovery in consumer confidence for the fourth consecutive month.
The US economy has held up well since the shock began. Consumption and business investment grew at a 4.1% annualized pace in Q2. At the same time, the scope for energy-driven disinflation has narrowed: WTI (the US reference) has averaged USD 82/bbl since 8 July, ranging between USD 72-92.
Inflation eased in June and July. The average CPI inflation rate across the fifteen leading emerging economies fell to 4.3% year-on-year in July, down from 4.8% in April. The inflationary impact remains weaker than in 2022, due in particular to reduced spillover effects on agricultural and food prices. Manufacturers’ views on the trend in input and finished product prices have returned to their pre-conflict levels. However, against a backdrop of increasingly frequent and destructive extreme weather events, pressure on agricultural and food prices is likely to continue.
Oil and gas markets remain volatile and followed different trajectories during August. The gas market does not benefit from the buffers in place in the crude oil market. Oil prices have stabilised at a high level, widening the gap compared to the 2022 crisis. While the increase in gas prices remains lower than that seen following Russia's invasion of Ukraine, the pace of the price increase is high.
The expectation that the surge in inflation, driven by this new energy shock, would be more moderate than in 2022 (with demand being less dynamic and supply less constrained) is confirmed. However, following the Memorandum of Understanding (MoU) signed in mid-June between the United States and Iran, inflationary risk has eased but has not disappeared. This MoU had seemed to reduce the risk of a severe escalation of the conflict, but since mid-July and the resumption of hostilities, it has entered a new phase of tensions, once again driving up hydrocarbon prices
The acceleration in consumer price inflation since February 2026 is much less significant than in 2022, and it stopped in May and June 2026. The average CPI inflation rate for the fifteen main emerging economies was estimated at 4.6% y/y in June, against 4.8% in April. The inflationary shock is more moderate than in 2022 notably due to more limited spillovers to agricultural and food prices.
Oil and gas markets lack direction amid persistent instability in the Strait of Hormuz. While oil prices have thus far reacted similarly to the two energy shocks (2022 and 2026), the rise in gas prices remains lower than the increase seen following Russia's invasion of Ukraine.
Since the Trump administration returned to power, the already considerable disparity in energy policy between the United States and Europe has significantly increased. Admittedly, both are seeking energy sovereignty. But, while European policies remain focused on the low-carbon transition, the current US administration is focused on enhancing US dominance in the fossil fuel sector and rolling back measures that support the energy transition. At first glance, the energy crisis is exacerbating this divergence. The US has consolidated its position as the world’s leading exporter of hydrocarbons, and its strategic oil reserves have served as a buffer against the crisis
Despite the war in Iran, the closure of the Strait of Hormuz and the temporary surge in energy prices, emerging economies have so far avoided a crisis scenario. Their growth is slowing marginally, inflation remains contained in most countries and financial markets have not collapsed. The most powerful growth engine is coming from Asia: global demand for chips, data centers and electronic goods linked to artificial intelligence is offsetting part of the oil shock and reshaping the external balances of several emerging countries.
A few months after the onset of a new global energy crisis, one might wonder about its implications for the low-carbon transition in emerging countries. The answer is not straightforward, as geopolitical uncertainties and the low-carbon transition are progressing according to different timelines, at least in part. The energy shock triggered by the blockade of the Strait of Hormuz calls for immediate action to secure hydrocarbon supplies, such as using strategic reserves. Conversely, the transition to low-carbon energy is a long-term process. However, the current circumstances are unusual: the low-carbon transition was initiated several years ago, and the Hormuz crisis marks the second major energy crisis in four years.
Key indicators for emerging countries: Real GDP, inflation, credit, current account balance, fiscal balance, public debt.
Panoramas as of 13 July 2026: a severe shock with varying effects in the North Africa/Middle East region; heightened fragilities in Sub-Saharan Africa; Latin America less exposed to the energy shock; Asia with strengths to face the energy crisis.
China’s economic growth continues to be characterised by a significant disparity between the robust performance of the export sector and the fragility of sectors that rely on domestic demand. This gap has even widened this year, fuelling concerns about China’s growth model and its imbalances with its trade partners. In recent months, China has once again demonstrated its resilience to external shocks. The impact of the energy crisis caused by the war in Iran on economic activity and inflation has been limited. Furthermore, exports have benefited from the surge in global demand for goods linked to AI and green technologies. This momentum is expected to continue in the short term.
South Korea is one of the countries most exposed to the global energy shock, yet it also reaps substantial benefits from soaring demand for artificial intelligence-related products. Despite the country's dependence on hydrocarbon imports, with the vast majority transiting through the Strait of Hormuz, short-term growth forecasts remain highly optimistic, bolstered by a robust export sector. Factors such as inflationary pressures, the depreciation of the won, and rising household debt, justify monetary tightening. In the longer term, the government is banking on an integrated AI ecosystem, encompassing data centres, robotics and advanced materials) to strengthen its key position in global value chains.
Indonesia is facing two external shocks: rising energy prices and capital outflows. The decline in governance quality has indeed impacted foreign investor confidence. Assuming that the conflict in the Middle East subsides, pressures on external accounts and energy subsidy costs are expected to ease. However, oil prices are expected to remain consistently above their early-2026 levels, perpetuating the risk of fiscal slippage. Investors remain cautious, and rupiah volatility is high.
Despite the energy shock, Poland’s economic growth is expected to remain robust and could even accelerate slightly in 2026. This growth is being driven by a recovery in investment, while consumption, although slowing, will continue to be one of its main pillars. Inflation remains moderate despite rising fuel prices and is expected to stay within the Central Bank’s target range. The external accounts, meanwhile, are very solid and can accommodate for the rise in energy costs. However, the trajectory of public debt is a cause for concern, particularly given that the government’s lack of a qualified majority is hampering fiscal consolidation.
