Global Macro Trends
The Strait of Hormuz remains a key determinant of global economic developments
May 2026
Although the armed conflict in the Middle East is approaching its third month, a sustainable resolution does not yet appear within reach. The parties involved are weighing their respective strengths and weaknesses, attaching critical importance to control of the Strait of Hormuz. With neither military operations nor diplomacy producing tangible results so far, uncertainty surrounding the global economy and financial markets remains elevated. Consequently, the prospect of transitioning into a period of persistent inflationary pressures, higher interest rates and greater geopolitical instability than in the past appears increasingly likely. It remains to be seen whether the recent US-China summit can shift the dynamics and create the conditions for a durable resolution.
In the United States, real GDP expanded by 2.0% on a quarter-on-quarter annualised basis in Q1 (Q4 2025: 0.5%), supported by the resumption of non-essential federal government services. The latest data and leading indicators suggest that the impact of the war remains relatively contained for the time being, primarily affecting the energy and transport sectors. However, inflationary pressures are beginning to emerge. Headline CPI inflation rose to 3.8% in April (March: 3.3%), although core inflation remained more subdued (2.8%, versus 2.6% in March). At the same time, labour market conditions remain relatively healthy. Much, however, will depend on how consumers respond to gradually rising prices and the resulting drag on domestic demand. Attention also turns to the first policy moves of the new Fed Chair, K. Warsh, and the balance of views that will emerge within the Fed, as well as to developments on tariffs following the US court ruling that struck down the duties introduced to replace the unconstitutional “reciprocal” tariffs.
In the euro area, GDP growth came in at 0.1% quarter-on-quarter and 0.8% year-on-year in Q1 (Q4 2025: 0.2% and 1.3% respectively). However, only a small share of the impact of the war has so far been reflected in the data. Economic growth over the coming period is therefore expected to be particularly fragile, weighed down by elevated energy costs. Europe's heavy dependence on imported energy products, combined with the need to compete on price with other regions (notably in Asia) to secure adequate supplies, places a heavier burden on businesses and consumers than in other major economies. The longer the conflict persists, the greater the challenges to the international competitiveness of European products – and, in some cases, to the viability of businesses – intensifying the debate over funding and possible support measures at the European level. On the positive side, the crisis found the euro area with inflation around the 2% mark and a resilient labour market.
In China, the most recent economic data point to a marked slowdown, exceeding expectations. War-related uncertainty is weighing on domestic demand, as reflected in the unusually subdued pace of retail sales growth and the low level of inflation. This picture is unlikely to change in the period ahead, as weaker external demand will probably temper export growth, while no meaningful improvement is yet visible in the property market.