Global Economics Chart Pack - Iran War Edition (May 2026)

While Gulf economies have already taken a big hit from the Iran war, the effect on activity in major economies seems to have been limited so far. Inflation has begun to rise and will continue to do so as it broadens out to non-fuel categories such as transport and food. Central banks are most concerned about potential second-round effects of higher energy prices on inflation. Given the current state of demand and labour markets in advanced economies, second-round effects are unlikely to entrench inflation, even as inflation expectations rise. That said, if inflation surges as in our adverse scenario, precautionary interest rate hikes are likely across the board. Even in our baseline scenario – which sees Brent crude ending the year at $80pb – the hawkish ECB looks set to hike.