The scenario many feared at the start of summer has now become reality. Rather than easing, geopolitical tensions have intensified, placing additional pressure on commodity markets, tightening financial conditions, and weighing on global economic performance. As a result, Coface has revised its risk outlook, implementing 3 country downgrades and 4 country upgrades, alongside 20 sector assessment revisions (12 downgrades and 8 upgrades).
Key highlights
- 0.5 percentage points: estimated impact of the Middle East conflict on global GDP growth in 2026 and 2027
- $100 per barrel: oil price benchmark surpassed in September
- 2.6%: Coface's projected global growth rate for 2027 (following 2.5% in 2026)
Inflationary pressures tighten their grip on the global economy
The international landscape deteriorated markedly throughout the summer months. Escalating tensions between Iran and the United States, combined with a deeper conflict between Russia and Ukraine, have disrupted supply chains and driven commodity prices sharply higher. While energy shipments through the Strait of Hormuz have expanded and trade routes have adapted, oil prices have risen by more than 50%, while natural gas prices have nearly doubled. Metal markets remain elevated, and agricultural commodities have experienced significant increases due to attacks on Black Sea port infrastructure and widespread European heatwaves (wheat prices are up 40% year-on-year).
These developments have reignited concerns about a renewed inflation cycle, prompting central banks to tighten monetary policy. The Federal Reserve followed the European Central Bank's lead by raising interest rates by 25 basis points (bps), adding further pressure to global financing conditions. Since reaching a low point in mid-January, the US dollar has appreciated by more than 6% on an effective basis, while long-term borrowing costs have climbed by more than 100 bps across most major economies since late February.
For the time being, global economic activity continues to demonstrate resilience, supported by strong investment linked to artificial intelligence and related wealth effects. Nevertheless, downside risks continue to build. Against this backdrop, Coface maintains its forecast of slower growth this year (+2.5%, after +2.8% in 2025), followed by a modest stabilisation in 2027 (+2.6%).
Country and sector risk outlook: Middle East downgrades and mounting pressure on agri-food industries
Across the Gulf Cooperation Council (GCC), economic activity is expected to weaken in 2026. Saudi Arabia (A3 → A4) faces growing exposure due to threats targeting both energy infrastructure and key export channels, while the United Arab Emirates (A2 → A3) and Qatar (A3 → A4) remain particularly vulnerable because of their dependence on trade passing through the Strait of Hormuz.
The agri-food sector has also been downgraded in six countries. In Europe (France, Austria and Poland), the decision is primarily linked to the severe weather events experienced during the summer of 2026. For the United Arab Emirates and Saudi Arabia, risk is driven more by dependence on food imports than domestic production challenges. In Argentina, the sector continues to struggle with a difficult financial environment characterized by agricultural business insolvencies, elevated operating costs and shrinking profit margins.
A global economy moving at different speeds
- In the United States, economic momentum remains strong, supported by resilient consumer spending, continued AI investment and a labour market operating near full employment (4% unemployment).
- Europe is performing slightly above expectations, benefiting from the strength of both Germany and Spain, despite ongoing concerns surrounding the sustainability of French public finances.
- In Asia, growth dynamics remain uneven. Vietnam (+8.4%) and India (+7.5%) continue to benefit from infrastructure investment and rapid adoption of AI-driven technologies. By contrast, domestic demand in China is losing momentum, while several regional economies (Thailand and the Philippines) are facing increasing pressure from higher energy costs.
- Across Africa and Latin America, persistently elevated inflation remains the primary challenge. Rising food and energy prices, amplified by the effects of El Niño, continue to put pressure on businesses, consumers and public finances.
The prolonged conflict in the Middle East is reviving the risk of another global inflation shock.
Rising energy, commodity and transport costs are forcing central banks to maintain restrictive monetary policies, which makes the environment increasingly challenging for the most vulnerable governments and businesses.
Jean-Christophe Caffet, Chief Economist at Coface
