Global Economics Intelligence executive summary, March 2026

Regional tensions are driving economic volatility. The situation in the Middle East has driven a surge in oil prices and heightened broader inflationary pressures. The American Automobile Association (AAA) reports that the average price of gasoline has risen to approximately $4 per gallon, up from $2.98 prior to the conflict. Other economies are likely to be harder hit, with the UK particularly vulnerable according to the OECD, which has cut its 2026 forecast for UK GDP by 0.5 percentage points—down from its previous estimate of 1.2%. At the same time, inflation is also predicted to be higher than expected.

The latest McKinsey Global Survey tracking executive sentimenton the economy finds that geopolitical instability currently overshadows all other perceived economic risks.  The survey was in the field when Middle East tensions escalated on February 28. Responses collected on and after that date were significantly less optimistic about both the global and domestic economies, although expectations for company growth remained primarily positive.

Unsurprisingly, energy prices have also become a significant focus. However, this was only seen in the responses received on and after February 28. For the first few days the survey was in the field, respondents were about equally likely to cite geopolitical instability and trade policy changes as a top risk to their countries’ economies, and energy prices weren’t a commonly cited risk. Then, geopolitical instability appeared as the predominantly cited risk, and energy prices became nearly as common a concern as trade policy changes.

Nevertheless, respondents remain optimistic about expectations for their own companies, with just over half of private sector respondents expecting demand for their companies’ products or services to grow over the next six months—a similar figure to last quarter. About 60% expect profits to grow, consistent with the past two quarters, the survey found.

Moving to the growth figures, global activity remains subdued and uneven. US real GDP growth for the fourth quarter of 2025 was revised down sharply to an annualized 0.7%, while the European Central Bank (ECB) now expects eurozone GDP growth of just 0.9% in 2026. UK growth also remains weak, with GDP up only 0.8% year on year in January.

Among emerging economies, India continues to outperform but is beginning to show signs of moderation. Brazil’s economy expanded by 2.3% in 2025, down from 3.4% in 2024, while Russia recorded only 1.0% growth. Mexico’s economy grew 1.2% year on year in February, supported mainly by services.

Consumer sentiment remains subdued across most economies, even if retail sales have held up better than expected.  Central banks largely kept rates unchanged in March.  Inflation pressures, however, are beginning to rise again. Energy prices linked to the conflict in the Middle East pushed inflation higher in several economies. Consumer inflation increased in the eurozone, India, and China, while inflation remained stubbornly above target in the UK and rose further in Mexico.  Commodity markets saw significant volatility in March.  At the same time, manufacturing activity strengthened globally, reaching its highest level in almost four years, driven mainly by Asia.

Labor markets remain broadly stable. Unemployment has ticked up in the US and a few other countries but generally remains low. The UK unemployment rate was steady at 5.2%, while eurozone labor market conditions continued to hold up relatively well.  Financial markets weakened noticeably in March as investors reacted to higher energy prices and concerns over slowing growth. Equity markets declined across most economies, volatility rose sharply, and borrowing costs remained elevated.  Trade performance remained mixed.

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