Fitch cuts global growth forecast as oil shock weighs on outlook

Tuesday, 9 June 2026 04:42 - - {{hitsCtrl.values.hits}}

Global growth prospects have deteriorated as the oil shock triggered by the US-Iran conflict and the prolonged closure of the Strait of Hormuz weighs on economic activity, prompting Fitch Ratings to lower its forecast for world growth in 2026.

In its latest Global Economic Outlook (GEO), Fitch reduced its forecast for global growth next year by 0.2 percentage points to 2.4%, citing the impact of higher energy prices on inflation, household spending and business costs.

The ratings agency said the forecast reductions were broad-based, with growth expectations lowered for the United States, Eurozone and most emerging markets, although stronger-than-expected performance in China and a boom in technology-related investment provided some offset.

Fitch Chief Economist Brian Coulton said the world economy was facing two powerful but opposing forces.

“The oil price shock is hitting world growth prospects and increasing downside risks. But we are also amid a very pronounced boom in global spending on IT and that is cushioning the impact on activity in the near term, particularly in Asia,” he said.

The agency said the Strait of Hormuz had remained closed for 14 weeks and assumed it would not begin reopening until July. As a result, it raised its average Brent crude oil price forecast for 2026 to $ 87 per barrel from $ 70 projected in March.

While describing the oil shock as a significant drag on growth, Fitch said the impact was expected to be considerably less severe than the oil crises of the 1970s. It noted that real oil prices reached the equivalent of $ 170 per barrel in 1979 and that oil consumption as a share of global GDP has halved since 1980.

Nevertheless, Fitch warned that risks remained skewed to the downside. Under an adverse scenario where oil prices average $ 100 per barrel in 2026, global equity markets fall by 10% and credit conditions tighten, US growth could slow to just 0.8% over the next 12 months, while Eurozone growth could fall to 0.3% and China’s growth to 3.4%.

The agency said the technology sector was emerging as a key support for global growth. US information technology investment expanded by 18% year-on-year in the first quarter of 2026, while global semiconductor sales surged 80% year-on-year in March.

Fitch said fiscal policy would provide additional support in some advanced economies. In the United States, a widening fiscal deficit is expected to support growth this year, while increased defence spending is projected to add a cumulative 0.8% to Germany’s GDP over the next three years.

The oil-driven rise in inflation is also reshaping expectations for monetary policy. Fitch said central banks remained cautious about the risk of a renewed inflation cycle despite softer labour market conditions and lower wage pressures compared with the post-pandemic period.

The agency now expects both the US Federal Reserve and the Bank of England to keep interest rates unchanged this year before resuming rate cuts in 2027. It also expects the European Central Bank to raise rates by 25 basis points in June, with that increase likely to be reversed next year.