Global Economic Outlook Q2 2026

The Middle East conflict will produce a temporary global slowdown and higher inflation, followed by a recovery from 2027 if oil supply normalises.

• MUFG assumes the conflict will ease, the Strait of Hormuz will gradually reopen and oil supply will return to its pre-February 2026 level by the first half of 2027.
• WTI is expected to peak at around USD 95/bbl in Q2 2026, then decline through H2 2027 while averaging just above USD 70/bbl, above the pre-conflict level of around USD 60/bbl.
• MUFG cut global growth forecasts to 3.0% in 2026 and 3.1% in 2027, with 2026 growth at 1.9% in the US, 0.7% in the euro area, 0.5% in Japan and 4.4% in China.
• Global inflation was revised up to 2.9% in 2026 and 2.3% in 2027; US and euro-area inflation are forecast at 3.5% and 2.9% respectively in 2026.
• The Fed is expected to delay two rate cuts from June and September 2026 to March and June 2027, while the ECB is forecast to hike twice in 2026 and the BoJ to raise its policy rate to 1.25% by end-2027.

Takeaway: Investors should expect weaker near-term growth, higher inflation and divergent central-bank policies, but the outlook depends heavily on the assumed de-escalation and recovery of Middle Eastern oil supply.