Oil shock cuts global growth outlook despite AI boom

InvestorDaily

Global economic growth is expected to slow this year as the fallout from the US-Iran conflict and a prolonged closure of the Strait of Hormuz pushes oil prices higher and fuels inflation, according to Fitch Ratings. In its June 2026 Global Economic Outlook, Fitch cut its forecast for world growth in 2026 by 0.2 percentage points to 2.4 per cent, citing the economic impact of higher energy costs on households and businesses. The ratings agency expects growth to ease from 2.7 per cent in 2025 as rising oil prices reduce real wages, dampen consumer spending and increase corporate input costs.

The downgrade follows Fitch’s decision to lift its average Brent crude oil price assumption for 2026 to US$87 a barrel from US$70 a barrel, reflecting the longer-than-expected disruption to Gulf oil exports. The firm now assumes the Strait of Hormuz will remain largely closed until July before shipping flows begin to normalise. Despite the weaker outlook, Fitch said a surge in artificial intelligence-related investment was helping cushion the blow from higher energy prices.

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