Forecasts show steady but fragile growth as war-linked energy costs rise

In short: Most forecasts say the US and global economies are not collapsing, but growth is slowing and the biggest risk is higher energy prices tied to the Iran conflict.

What's going on

Several major forecasts paint a similar picture for 2026. The global economy is expected to keep growing at about 3.2%, and the US is expected to grow around 2%. That is slower than in stronger years, but it is still growth, not a broad downturn.

Jobs are also cooling, but not falling off a cliff. One forecast notes a weak recent jobs report and unemployment around 4.4%, then expects it to drift to about 4.2% by late 2026. Other outlooks also expect only modest changes, which suggests a slower hiring market rather than mass layoffs.

Inflation, meaning the pace of price increases, remains a problem. A big reason is energy. The war involving the US, Israel, and Iran has disrupted oil and gas flows through the Strait of Hormuz, pushing oil prices to around $90 a barrel and raising gasoline prices. Forecasters also point to tariffs, which are taxes on imported goods that can show up as higher prices in stores.

One bright spot in these forecasts is business spending tied to AI. Banks estimate US companies will keep investing heavily in AI-related facilities like data centers (large buildings full of computers), which can support growth even when other parts of the economy slow.

What to watch

Energy is the key swing factor. Some forecasts assume the conflict eases and oil prices fall, keeping growth positive. A worse scenario is a longer disruption that pushes oil above $150 a barrel, which could tip many countries into recession (a broad economic slowdown).

Source: NYTimes