ING Monthly: Already playing into extra time

Articles ING Monthly: Already playing into extra time 11:00 Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Traditionally, the World Cup may have offered a welcome reprieve from global uncertainty and heavy headlines. Still, there are moments when even the world’s most popular distraction falls short. As the near-closure of the Strait of Hormuz plays into extra time and central banks grapple with the fallout, this month’s macro forecast is one of them Carsten Brzeski There are moments when even the world’s most popular distractions fall short, and this month's macro forecast may be one of them The 2026 World Cup starts today.

Traditionally, this is the moment when economists permit themselves a small, sanctioned act of intellectual frivolity. Forget the hard stuff for a week or two. Write something about host nation GDP multipliers, or the peer-reviewed – yes, peer-reviewed – literature on winning World Cup titles and consumer confidence or stock markets.

Some even go as far as predicting the future World Cup champion with economic models. Having trouble forecasting what inflation will be doing a few months from now, yet playing around with World Cup results – why not? I am a football fanatic and, believe me, I tried to come up with some great World Cup lines and parallels.

The draft exists, and it was actually quite good. High hopes and broken dreams – reminiscent of many European economies at the start of the year, and then a few months later, facing stagflationary pressures amid the latest energy price shock. Or how about geopolitical risk as the dodgy VAR decision lurking in the background?

Everyone has an opinion, nobody fully understands it, and in the end, it rarely changes the final score as much as the pundits claim. Except this time it does. Quite a lot, actually.

The rest of that World Cup draft is in the drawer now. Not only is it hard to get too excited about a scaled-up World Cup where ticket prices appear to be rising faster than inflation forecasts, but the macroeconomic situation is also simply too uncertain, too fragile, to find easy distraction in 22 men chasing one ball. The Russian invasion of Ukraine has now lasted longer than World War I; the war in the Middle East has entered its fourth month.

Even if it sometimes feels as if the world has grown used to these conflicts and geopolitical shifts, energy markets suggest otherwise. This is why we have once again updated our baseline scenario, assuming that the effective near-closure of the Strait of Hormuz will continue and will, by mid-July, create a critical chokepoint in global oil supply. Prices would soar, potentially reaching $120–130 a barrel, eventually becoming the trigger for the US to reach a compromise with Iran on at least reopening the Strait gradually from August onwards.

As a result, we have revised our inflation forecasts upwards across the board. These upward revisions are intensifying stagflationary pressures and worsening the already pressing dilemma for central banks: to look through a typical supply shock, or demonstrate a willingness to act and pre-empt a worse inflation spiral. Either option carries risks; rate hikes may worsen an economic downswing, but waiting too long could harm hard-won inflation-fighting credibility.

It almost looks like a lose-lose situation. We think the ECB is most concerned with its credibility and, in turn, will be both the first central bank to hike and the first to hike twice. Other central banks will follow, with only the Fed potentially remaining on the other side of the scale – though it'll still face rising pressure to engage in a symbolic pre-emptive hike.

In short, we are ending the first half of 2026 very differently from how we had anticipated it at the start of the year. Instead of a global economy gaining momentum with central banks potentially cutting rates on the back of inflation undershooting, we are witnessing a global economy facing new supply chain frictions, an energy price shock and higher interest rates. In normal times, a scaled-up World Cup would have offered some welcome distraction and food for nerdy headlines.

Unfortunately, there are times when even the world’s most popular distraction feels somehow inappropriate to fully dive into. This month’s macro forecast is one of them. Carsten: Our changing forecasts amid dire geopolitical backdrop Our main calls Energy : With little tangible evidence of an imminent deal between the US and Iran to get energy supplies flowing through the Strait of Hormuz once again, we believe oil and gas markets are being too complacent.

We expect ICE Brent to average USD 110/bbl in Q3, with a possible spike to 120-130 in July. For natural gas, we think increasing competition from Asia for LNG cargoes will push the European TTF benchmark to average 60 EUR/MWh in Q3. Federal Reserve: While we’re yet to be convinced the Fed will hike rates, we’ve pushed back our forecast for the next rate cut to mid-2027.

European Central Bank : Given our higher oil – and particularly natural gas – forecasts, we’ve added a second ECB rate hike this summer to our projections. Bank of England: We expect an on-hold decision in June, but higher energy prices will make it hard for the BoE to avoid a rate hike in July. China: Soft Chinese domestic activity data is likely an omen of decelerating growth in the second quarter, even as external demand remains strong.

We maintain our call for a single 10bp rate cut in the fourth quarter. FX: We’ve cut our EUR/USD profile on a more hawkish Fed and our forecast for higher energy prices through the rest of 2026. We expect EUR/USD to end the year at 1.17.

Market rates: Our baseline view is for the US 10-year to hug the 4.5% area, with a risk of a spike to 4.75%. Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.

Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Carsten Brzeski Global Head of Macro Carsten Brzeski is the Global Head of Macro for ING Research. Previously, he worked at ABN Amro, the Dutch Ministry of Finance and the European Commission. He is a 2019 JFK Memorial Policy Fellow… In this article Our main calls