The war in the Middle East sets the stage. For the US and Europe, we expect lower growth, higher inflation, stronger fiscal pressure and a challenging situation for central banks.
AI hype deflates amid the capex-monetization debate. Despite strong recent earnings, investor focus has shifted from profitability boost to revenue growth trajectory and cash-flow visibility, particularly given hyperscalers’ elevated capex plans (≈USD575bn, +50% expected in 2026) and weakening sentiment toward software amid risks of AI-driven revenue dilution.
The EU Emissions Trading System (ETS) is at a political and structural inflection point, with allowance prices falling sharply by around -24% in the first two months of 2026.
A 4-6-week disruption of the Strait of Hormuz could push average EM inflation higher by +0.8-1.0p with limited recessionary effects – apart from GCC countries.
The energy price shock will delay the Fed’s single rate cut in 2026. Rising energy prices should push US inflation towards +3.6% y/y in April-May, up from +2.8% expected before the Middle East conflict, under the assumption that oil prices remain around 90 USD/bbl on average in Q2.
In 2025, the Allianz Social Resilience Index (SRI) records a third consecutive – albeit modest – improvement, but underlying divergence remains pronounced.
