The global economy has so far withstood the impact of the US-Iran conflict, but the margin for error is narrowing as prolonged disruption to energy flows could push the world into recession, Wood Mackenzie analyst Peter Martin said in a Monday note.
Martin raised its forecast for global GDP growth to 2.5% in 2026 from 2.3%, with growth expected to accelerate to 3.0% in 2027. He cited strategic energy reserve drawdowns, the rerouting of Gulf energy exports and a strong artificial intelligence investment boom as key supports.
The outlook depends heavily on the resumption of normal energy transit through the Strait of Hormuz, he said.
A prolonged disruption could exhaust strategic reserves and trigger energy rationing, price spikes and higher inflation, forcing central banks to tighten monetary policy and potentially tipping developed economies into recession. The collapse of a US-Iran memorandum of understanding in June has already delayed the consultancy's expected timeline for a resolution.
Regional economic performance is diverging sharply. Iraq, Kuwait, Iran and Qatar are expected to contract this year, while Saudi Arabia's economy shrank 4.8% year on year in the second quarter. Martin said Saudi Arabia's diversification efforts, including non-oil revenues accounting for 46% of government income versus 27% in 2015, provide some shock absorption.
In Asia, Taiwan, South Korea and Malaysia are benefiting from the AI supply-chain boom, with combined exports rising more than 40% year-on-year in the first half. Taiwan's economy grew 14.5% year on year in the first quarter.
In the US, AI investment accounted for an estimated 61% of GDP growth in the first half, while capital spending by the five largest technology companies is expected to exceed $700 billion this year.
Europe remains a laggard, with EU-27 growth forecast at 1.1%, constrained by regulation, limited domestic hyperscaler capacity and electricity-grid bottlenecks.
Wood Mackenzie said geopolitical fragmentation, energy security and the US-China AI race are likely to reshape trade, commodity demand and investment for years to come.