Global economic outlook: Geopolitical drag

War in the Middle East and its economic impact

Financial stability vulnerabilities remain elevated as geoeconomic shock unfolds

The war takes a toll on growth; but more on economic than earnings

The desk believes that the recent surge in oil prices, driven by geopolitical tensions, will have a more pronounced impact on global economic growth than on corporate earnings. Per the full note from BofA Global Research, they have revised their 2026 U.S. GDP growth estimate down by half a percentage point, primarily due to the higher oil price forecast, while S&P earnings remain resilient, particularly in the energy sector. This divergence suggests that while economic indicators may weaken, earnings could still hold steady, especially if driven by energy sector performance. The consensus among firms shows a mixed outlook, with targets ranging from 1.04 to 1.10 for the USD/EUR pair, indicating uncertainty in currency movements amid these developments.

Chief Economist's Corner: The Middle East war shapes EU's future energy policy