As the Middle East moves towards a fragile lull in hostilities, the economic shock caused by the conflict – supply chains perturbation, inflation… – is already spreading to the global economy with oil-importing economies such as South Africa particularly exposed to rising inflationary pressures, notably on food and transport. Against this backdrop, Coface has carried out eight country risk assessment downgrades and 45 sector risk assessment changes (41 downgrades, compared with just four upgrades).
Key figures:
- +2.3 per cent: expected global GDP growth in 2026
- -0.6 percentage points: cumulative revision to the global growth forecast for 2026 and 2027
- USD 85 per barrel: expected average price of Brent in 2026.
A lull in geopolitical tensions does not mean a return to normality
After more than fifteen weeks of conflict, the signing of the memorandum of understanding between the US and Iran heralds a period of calm for the Middle East, in a regional environment thwarted by fragility. But the hiatus cannot conceal the key issue: the duration and intensity of the conflict, which far exceeded initial expectations, have profoundly disrupted a crucial region in the global economy.
The Strait of Hormuz is a strategic chokepoint for the supply of hydrocarbons and their derivatives. Very few countries – particularly in South-East Asia and on the East African coast – have been able to sidestep these disruptions. Any return to normality – if possible – will take time.
Could a new inflationary shock cause lasting damage to African economies?
In Africa, the direct impact of the Middle East conflict will be uneven. Oil products are a significant component of the continent’s energy mix, but their consumption is concentrated in the most industrialised economies such as South Africa, Egypt, Nigeria and Morocco.
While less developed countries are less dependent on oil consumption and therefore relatively less exposed to supply shortages, all African economies will be affected by the inflationary shock and its spillover effects, particularly if food prices rise due to higher input costs, fertiliser shortages and adverse weather conditions.
This is expected to weigh on GDP growth in 2026 and 2027. Countries with deteriorated public finances or external accounts face heightened risks in a context of tighter financing conditions. At the same time, commodity exporters will benefit from higher prices, reinforcing divergence across the continent.
The global economy is holding up but slowing down
The global economy has so far absorbed the shock, notably thanks to prior stock-building and adjustments to demand. But this phase is reaching its limits. Production stoppages in certain sectors, the return of inflationary pressures, the tightening of financial conditions are the first indicators of these difficulties, whilst governments have very little room for manoeuvre when it comes to supporting economic activity and incomes.
Against this backdrop, Coface is revising its global GDP growth forecast downwards to 2.3% for 2026 and 2.5% for 2027, a reduction of 0.6 percentage points over two years.
Supply chains under strain
The virtual closure of the Strait of Hormuz – 145 vessels transited the passageway in May compared with over 3,300 a year earlier – has disrupted global transport and once again put supply chains under strain. Companies are already reporting longer delivery times, rising costs and early signs of shortages, prompting them to build up precautionary stocks at the expense of increased pressure on cash flow and margins. Against this backdrop, corporate insolvencies are expected to continue rising this year (+6% globally), with some countries seeing particularly sharp increases (notably the US, France and Japan).
In detail, the impacts vary from region to region
The shock is global, but the intensity varies significantly by region.
- In the Middle East, the Gulf states have been the most directly affected, with sharp contractions because of their dependence on the Strait.
- In Europe, rising energy prices and prolonged uncertainty are weighing on domestic demand, with growth of just 0.7 percent expected for the eurozone.
- In the US, inflation is rising again (from 2.4% in February to 4.2% in May), weighing on purchasing power and consumption by low-income households.
- In Asia, the picture is mixed, with some sectors still performing strongly (South Korean semiconductor exports up 153 percent since the start of the year) whilst others are having to cope with squeezed margins.
- Lastly, in emerging economies, particularly in Latin America, the shock has been materialised by a resurgence of inflation and more restrictive monetary policies, which is the case in Brazil, where the key interest rate stands at 14.5%.
Jean-Christophe Caffet, Chief Economist at Coface
“The lull in hostilities in the Middle East is good news, but it cannot conceal the key issue: the disruptions that are already under way will drag on business activity, income and employment. An unprecedented total of 41 sector downgrades across 19 countries underscores the global impact of a conflict whose consequences for trade flows and corporate profitability will continue to weigh heavily in the coming months”.
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