Middle East Conflict Threatens Global Growth as Commodity Prices Surge, Coface Warns
Economic risk insurer downgrades Saudi Arabia, the UAE and Qatar as rising energy costs fuel inflation concerns. The escalating conflicts in the Middle East and Ukraine are driving up commodity prices, tightening financial conditions and threatening global economic growth, according to trade credit insurer Coface.
The company estimates that the Middle East conflict could reduce global growth by 0.5 percentage point in 2026 and 2027. Oil prices exceeded $100 a barrel in September, while natural gas prices have nearly doubled.
Coface forecasts global growth of 2.5% in 2026, down from 2.8% in 2025, before a slight recovery to 2.6% in 2027.
In its latest assessment, Coface downgraded three countries and upgraded four. It also revised 20 sector risk assessments, including 12 downgrades and eight upgrades.
Gulf Economies Face Mounting Risks
Economic activity is expected to contract across Gulf Cooperation Council countries in 2026, Coface said.
Saudi Arabia's risk assessment was downgraded from A3 to A4 because of its exposure to attacks on energy infrastructure and disruptions to export routes. The United Arab Emirates fell from A2 to A3, while Qatar was downgraded from A3 to A4. Both countries are vulnerable to disruptions in the Strait of Hormuz.
Rising energy prices and supply chain disruptions are also renewing inflation concerns. Wheat prices rose 40% year over year following strikes on Black Sea port terminals and summer heatwaves in Europe.
The Federal Reserve and the European Central Bank have each raised interest rates by 25 basis points in response to renewed inflationary pressures, contributing to tighter global financial conditions.
Agriculture and Regional Growth Under Pressure
Coface downgraded the agri-food sector in six countries. In France, Austria and Poland, the changes reflect extreme summer weather. In Saudi Arabia and the UAE, heavy reliance on food imports increases vulnerability to international price shocks. Argentina's agricultural sector continues to face high costs, tight margins and business failures.
Economic performance remains uneven worldwide. The U.S. economy is supported by household spending, AI investment and a 4% unemployment rate. Europe is performing slightly better than expected, driven by resilient growth in Germany and Spain, although concerns persist over French public finances.
In Asia, Vietnam and India are forecast to grow by 8.4% and 7.5%, respectively, supported by infrastructure spending and AI-related technologies. China's weakening domestic demand and rising energy costs in Thailand and the Philippines are weighing on regional momentum.
Africa and Latin America remain vulnerable to persistent inflation driven by higher agricultural and energy prices, with El Niño adding to the risks.
Global Outlook Remains Uncertain
Despite mounting pressures, the global economy has remained resilient, partly thanks to AI-related investment. However, Coface warned that prolonged conflict in the Middle East could trigger another global inflation shock.
Higher energy, commodity and transportation costs are forcing central banks to maintain restrictive monetary policies, creating a more challenging environment for vulnerable economies and businesses.
With growth expected to remain below 2025 levels in 2026, geopolitical developments and commodity price movements will be critical to the global economic outlook.
