LONDON—Escalating concerns over prolonged disruption tied to the Middle East conflict are prompting economists to cut global growth forecasts and warn lenders about rising inflation, weaker consumer demand and growing recession risks that could pressure borrowers and credit quality worldwide.
Oxford Economics said it now expects global GDP growth of 2.4% in 2026, down 0.4 percentage points from its previous forecast, citing expectations for extended shipping disruptions through the Strait of Hormuz, higher energy prices and mounting pressure on household finances. The firm said global inflation could climb to 4.4% in the second quarter as oil, natural gas, fertilizer and aluminum costs rise, complicating central bank efforts to avoid stagflation.
According to Oxford Economics, Brent crude is now expected to average $113 per barrel through the second quarter before easing later in the year, though the firm warned a prolonged six-month disruption in the Strait of Hormuz could trigger energy shortages and potentially push the global economy into recession. For lenders, the outlook raises concerns about consumer affordability, business borrowing conditions and rising operational costs across multiple industries.
The weaker economic outlook is already flowing into the auto sector. Data from GlobalData showed global light vehicle production forecasts for 2026 were cut again due to the expanding conflict and rising logistics costs. Global production is now expected to total 93.3 million units in 2026, up just 0.5% year over year, as automakers contend with weaker demand and supply-chain uncertainty.
GlobalData said Asia remains especially vulnerable because of its reliance on Middle East commodity flows, although stronger-than-expected first-quarter vehicle production in China, Japan and Korea helped offset some forecast cuts. Analysts warned lenders with exposure to auto lending, transportation, manufacturing and energy-sensitive consumers may face increasing risks if inflation remains elevated and economic growth continues to weaken.