S&P Global Raises Inflation Outlook, Cuts Growth on Oil Risks

S&P Global has revised its 2026 economic outlook with a clear warning. Inflation is expected to stay higher than previously thought, while growth is likely to slow across most major economies. The change is tied directly to rising geopolitical tension in the Middle East, particularly the conflict involving the United States and Iran, which has pushed energy markets into a period of uncertainty.

At the center of the forecast is crude oil. S&P Global expects Brent crude to average around 90 dollars per barrel in March. That figure alone is enough to keep pressure on consumer prices, especially in countries that rely heavily on imported energy. The firm also notes that prices could ease later in the year if supply routes remain open and disruptions stay limited.

why oil prices are driving the outlook

The Strait of Hormuz plays a central role in this situation. It is one of the most important shipping lanes for global oil supply. Any disruption there has an immediate effect on prices. Even the risk of interruption can lead to sharp market reactions, as traders factor in the possibility of reduced supply.

S&P Global’s baseline scenario assumes that the disruption remains contained. Under that assumption, oil prices may stabilize toward the end of the year. But the firm also outlines a more severe case. If the conflict intensifies and supply is significantly affected, crude prices could spike to 200 dollars per barrel during the second quarter. That would push inflation much higher and place further strain on economic growth.

impact on global growth

Higher energy costs tend to ripple through the entire economy. Businesses face increased operating expenses, and many pass those costs on to consumers. Households then cut back on spending in other areas, which slows overall economic activity. This chain reaction is one reason S&P Global has lowered its growth projections for 2026.

The effect is not limited to one region. Both advanced and emerging economies are expected to feel the pressure. Countries with weaker currencies may face an even tougher situation, as higher import costs add to domestic inflation.

what this means for policymakers

Central banks now face a difficult balance. Higher inflation would usually call for tighter monetary policy, but slower growth argues for caution. This tension leaves policymakers with fewer clear options. Decisions on interest rates will likely depend on how energy markets behave in the coming months.

For now, the outlook depends heavily on the situation in the Middle East. If oil prices stay near current levels, economies may manage a gradual slowdown. A sharp spike, however, would change that path quickly and force governments to respond under more pressure.