Global Growth Prospects Diminished Amid Rising Geopolitical Tensions
What initially looked promising for the global economy in 2026 has quickly deteriorated. According to Prometeia’s latest quarterly economic outlook, military actions involving Iran, coupled with escalating tensions in the Strait of Hormuz, have laid bare the foundational vulnerabilities of the world economy, particularly its reliance on stable energy supplies and unimpeded trade routes.
Consequences of the Energy Crisis on Growth
The ripple effects of these developments are substantial. Global growth forecasts have been downgraded as risks emerge concerning the duration of the conflict, potential damage to oil production facilities, and the responses of central banks to a new wave of inflation. Prometeia’s baseline scenario does not foresee significant disruptions in production capacity among major oil producers, including Iran. Nonetheless, the expected macroeconomic repercussions from this energy crisis are likely to manifest over the coming quarters, resulting in heightened inflation, tighter financial conditions, and a decline in both business and consumer confidence.
Europe Faces Significant Economic Challenges
Europe is bearing the brunt of this downturn, with the eurozone experiencing the steepest growth revision among major economies. Prometeia has decreased its 2026 eurozone growth forecast by 0.4 percentage points, now estimating an expansion of only 0.8%, down from an earlier prediction of 1.2%. The continent finds itself in a particularly precarious situation, having relied on decreasing inflation to spur recovery in 2025. The conflict in Iran threatens to undo this progress. Gas reserves are alarmingly low, import costs are rising, and energy supply diversification efforts initiated after Russia’s invasion of Ukraine are proving to be inadequate.
Monetary Policy Adjustments in Europe
The shifting landscape has also affected monetary policy, with expectations for further rate cuts giving way to predictions of increases. This change is largely influenced by policymakers’ earlier miscalculations regarding post-pandemic inflation. Prometeia anticipates that the European Central Bank (ECB) will raise interest rates by 25 basis points before the summer in an attempt to reaffirm its commitment to price stability.
United States Economic Resilience Under Pressure
The United States is expected to conclude 2026 with GDP growth around 2.1%, roughly in line with 2025, bolstered by residual effects from the previous year. However, this resilience does not imply immunity from the conflict’s impacts. Despite its energy self-sufficiency, the U.S. has experienced a surge of over 30% in petrol prices since late February, leading to declining consumer confidence and indications of persistent weakness in the labor market. The current inflation rate, above 3%, combined with labor market uncertainties, is hindering private consumption, which is a critical component of U.S. growth according to Prometeia.
Italy Faces Unique Economic Pressures
Italy finds itself in a particularly precarious economic position. Prometeia has adjusted its 2026 GDP growth forecast down by 0.3 percentage points, now predicting only 0.4% growth compared to 0.7% in December. With average inflation nearing 3%, household purchasing power is diminishing, resulting in stagnant real incomes year-on-year. Italy’s greater exposure to international energy markets exacerbates the impact of rising oil and gas prices on domestic inflation.
Potential Lifting from the National Recovery and Resilience Plan
Data from Prometeia reveal that should energy prices remain elevated through 2028, or experience sharp increases similar to the 2022 crisis, Italy may face disproportionately severe consequences compared to the eurozone average. The ongoing situation is compounded by the fact that the current crisis emerges not during an economic upturn but within an already fragile cycle, further straining Italian households and businesses. Nonetheless, the National Recovery and Resilience Plan (NRRP) is one bright spot; as its execution accelerates in 2026, projects nearing completion are expected to contribute roughly 0.3% to GDP, offering a much-needed lifeline. Without this support, Prometeia warns that Italy’s growth would likely stagnate.