Global Macro Trends | March 2026

 

 

 
With the conflict in the Middle East now in its third week and, crucially, showing no signs of imminent de escalation or an exit strategy, the economic repercussions at a global level are already evident. The significant decline in exports of oil and liquefied natural gas from Gulf countries - for a period that remains indeterminate - has led to a sharp rise in energy prices and in the cost of transporting goods. As a result, concerns about a resurgence in inflation are intensifying, alongside pressure for government intervention to support vulnerable households and businesses, as well as heightened uncertainty in international markets. Within this context, economic activity is becoming increasingly constrained, and growth prospects appear less favourable than they were at the beginning of the year. Nevertheless, major economies continue to expand at a reasonably satisfactory pace. 
 
In the United States, growth in the fourth quarter of 2025 slowed to 2.0% year on year (Q3: 2.3%), while full year growth for 2025 reached 2.1%, down from 2.8% in 2024. Inflation, as measured by the PCE index, remains elevated relative to the Federal Reserve’s 2% target, while labour market conditions suggest a relative balance between demand and supply, reflected in subdued levels of both new job creation and layoffs. At the same time, war related expenditures are exerting additional pressure on the execution of the federal budget, while projected tariff revenues have declined following the Supreme Court’s ruling that so called “reciprocal” tariffs are unconstitutional and their temporary replacement with lower duties. Nevertheless, among major economies, the United States remains best positioned to manage energy related challenges, supported by its substantial domestic production of oil and natural gas.
 
In the euro area, growth reached 1.4% in 2025 (2024: 0.9%), while inflation is hovering around 2%, in line with the European Central Bank’s target, and the unemployment rate remains at historically low levels. Developments in leading business indicators have also been encouraging, with PMI surveys, for the first time since June 2022, uniformly pointing to an expansion in activity, partly reflecting improved sentiment following the initiation of higher defence spending. At the same time, consumer confidence has also become less pessimistic. However, the lack of sufficient domestic energy resources and the resulting reliance on substantial imports of oil and liquefied natural gas leave the euro area particularly vulnerable to supply disruptions and price increases, placing significant pressure on both businesses and households.
 
In China, economic data for the first two months of the year point to a continuation of growth, with a slightly accelerating pace compared with the fourth quarter (4.5% year on year). For 2026, the government has set a growth target of 4.5%–5.0%, marginally below the 5% achieved in each of the past two years. We expect exports to remain the main driver of activity for another year, as the scope for a meaningful acceleration in domestic demand still appears limited, particularly in light of the long standing and difficult to resolve challenges in the property sector. At the same time, elevated strategic oil reserves and greater geographical diversification of energy imports provide China with increased flexibility in managing energy related challenges.