Atradius: Mideast Ceasefire Contained Stagflation Risk
Insurance firm Atradius reports that a fragile ceasefire in the Middle East has, for now, contained the risk of a severe stagflation shock. Easing energy price pressures are supporting global economic growth.
The risk of a significant stagflation shock has been contained for the time being, according to the latest Atradius Economic Outlook. A ceasefire between the US and Iran has eased pressure on energy prices following disruptions to flows through the Strait of Hormuz.
Atradius forecasts global GDP growth to slow to 2.4% in 2026, down from 3.0% in 2025, before recovering to 3.1% in 2027. While the conflict initially weighed on economic activity through higher energy costs, the baseline outlook assumes a gradual reopening of the strait, helping the global economy avoid a sharper downturn.
The report highlights the ongoing investment boom in technology and artificial intelligence as a key support for the global economy. Strong spending on data centers, semiconductor manufacturing, and cloud infrastructure continues to underpin growth, particularly in the US. AI-related trade also remains an important driver of international commerce.
Central banks are responding differently to the energy shock. The European Central Bank has raised interest rates, while the US Federal Reserve is maintaining higher rates for longer. China continues a moderately loose monetary stance to support domestic demand. These varying responses underscore the uneven impact of the Middle East conflict across major economies.
Atradius warns that downside risks remain prominent, with a potential re-escalation of the US-Iran conflict being the primary threat. Such an event, leading to prolonged closure of the Strait of Hormuz and surging energy prices, could push global GDP into recessionary territory.