Fitch Ratings lowers global growth expectations

The ongoing conflict in Iran has prompted organizations to reduce their economic growth forecasts for the year. Fitch Ratings piled on Thursday, announcing it had lowered its 2026 global growth forecast by 0.2 percentage points, to 2.4%.

Fitch cited “the oil crisis prompted by the US-Iran war” as its chief reason behind the reduced forecast. It also cited higher inflation, which is eating into real wages, lowering consumption, and increasing firms’ input costs.

The ratings agency also noted, though, that strong AI investment has softened the economic blow of the oil crisis.

The war in Iran created a bottleneck in global trade after the Iranian military blocked shipping traffic through the Strait of Hormuz. Fitch doesn’t expect the strait to reopen until July. Therefore, it revised its forecast for this year’s average price for Brent crude to $87 a barrel, up from $70 in March.

“The oil price shock is hitting world growth prospects and increasing downside risks,” Brian Coulton, Fitch’s chief economist, said in a statement. “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.”

Still, Fitch lowered its US growth forecast from its March outlook by 0.3 percentage points to 1.9%, and lowered its eurozone forecast by 0.4 percentage points to 0.9%. However, it raised China’s forecast 0.3 percentage points to 4.6%, thanks in part to “remarkable resilience in exports.”

Fitch also imagined “an adverse scenario,” given high geopolitical uncertainty. In that scenario, “growth in the US could fall to just 0.8% over the next 12 months (i.e. through the year to 1Q27).”

In May, the International Energy Agency reported it expected world oil demand to contract this year to 104 million barrels a day, 1.3 million barrels a day less than its prewar forecast. The IEA also noted that global oil supply fell 1.8 million barrels per day in April, as Gulf countries contended with the strait’s closure.

A CFO concern. As CFO Brew reported in April, recent surveys show finance leaders have pricked up their ears to geopolitical risks.

Events like the Iran war create volatility, which makes it harder for organizations to forecast and plan, Aidana Zhakupbekova, CFO of expense-management software firm Rydoo, told us at the time.

The National Association for Business Economics (NABE) Business Conditions Survey from May found that almost half (48%) of NABE members at private-sector firms polled said the Middle East conflict “has negatively impacted their businesses.”