Global Economics Quarterly Crosscurrents

Research evidence excerpt

Global Economics Quarterly Crosscurrents

Economics ● Global

Q3 2026

Executive summary

Ceasefire extended, lower oil, but what about a final deal?

The signing by the US and Iran of a Memorandum of Understanding (MoU) to extend the ceasefire

and lay a framework for future nuclear negotiations leaves many important questions unanswered.

Material risks persist. Even assuming the US-Iran talks on the nuclear programme and other sticking

points proceed as planned, it is far from clear what the new normal in the Strait of Hormuz will look

like. Already Iran has indicated there will be no return to the pre-war status quo.

Nonetheless, the rapid drop in the Brent oil price to around USD80/b in response to the 60-day

Energy prices have fallen

ceasefire extension and the commitment to re-open the Strait – assuming it is sustainable – would

limit the downside risks to growth and limit some of the upside risks to inflation and be in line with our

central case scenario for the global economy. We have been assuming that Hormuz traffic and Gulf

output would gradually restart in June, and a return to near-normal system-level production and flows

would occur by end-Q3 2026.

Crosscurrents

The pace at which the Strait re-opens will not be the sole influence on the global economy in

2026-27, even if it is the single biggest one. There are also other powerful forces moving in different

directions at the very same time, which could have very uneven effects: in particular the AI-related

export and investment boom which we discuss on pages 24-32 and the risks to agricultural output

and prices from severe El Niño weather conditions which we examine on pages 33-39. Fiscal policy

will also have varying impacts on the growth trajectory in 2026-27.

Consumer spending to soften…