“The Globe” written by Eurizon Asset Management.
2026 has been a volatile year so far, mainly because of the well-known geopolitical events. But what has been their impact on the broader market outlook? Let us examine it through the lens of the consensus view expressed by economists and financial analysts, as well as the implicit expectations embedded in market prices.
The defining feature of this first half was the impact of the war in Iran on oil prices, with the closure of the Strait of Hormuz, which triggered a significant increase in inflation forecasts.
In the eurozone, while early-year forecasts pointed to stable inflation, slightly below 2%, estimates for 2026 have been revised significantly higher, to around 3%. For 2027, however, the upward revision to consensus has been more limited, underscoring the temporary nature of the inflationary shock.
Similar considerations apply to the United States, where average inflation for 2026 is now estimated at 3.5%, up from 2025, but with a return to levels close to 2% in 2027, once again illustrating the temporary nature of the inflationary shock.
From the standpoint of economic growth, although the global economic cycle is continuing, growth estimates have been revised lower in response to the oil shock, a consequence of geopolitical tensions.
In the eurozone, the downward revision to growth forecasts has been fairly pronounced.
Here, the effects of the energy crisis on economic activity are more severe than in the United States, because of a greater dependence on raw-material imports.
Average growth in the eurozone is expected to remain below 1% in 2026, roughly half the pace recorded in 2025, and forecasts for 2027 have also been revised slightly lower.
In the United States, the picture looks more resilient, with the impact of geopolitical tensions largely offset by the structural investment cycle in technology and by a labour market that has returned to recovery mode.
As a result, the downward revision to 2026 growth forecasts for the US economy is smaller than the one affecting Europe, with growth still expected to hold around 2%, broadly in line with 2025 and with expectations for 2027.
The rise in oil prices, driven by inflationary pressures, has also influenced central banks’ monetary policy decisions.
In Europe, despite modest economic growth and the negative impact of the energy shock, the ECB focused on inflation risk and its spillover effects, raising rates in June from 2% to 2.25% (deposit rate).
The market expects another rate hike this year, but this will depend largely on how oil prices evolve after the agreement reached between the United States and Iran on reopening the Strait of Hormuz.
As for the Fed, the rate-cut expectations that had been built into early-year forecasts, before the war between the United States and Iran, have been put on hold for 2026. To date, a robust macroeconomic backdrop, a labour market in recovery and inflation accelerating because of the energy shock have led the Fed to slightly raise its rate projections.
Money-market futures, which are more focused on economic momentum than on inflation fears, are now pricing in the need for a rate increase toward the end of 2026 to prevent the economy from overheating.
As for bond markets, the future can be inferred from forward rates, which provide an indication of the future rates implied by the current shape of the yield curves.
The euro curve, with short-term rates close to 2.6%, long-term rates (10 years) at 3%, and a one-year curve sloping upward with rates almost identical to today’s levels, suggests that markets have already priced in a possible further ECB rate hike and are showing no significant concern either about a renewed deterioration in growth or about a fresh acceleration in inflation.
The US curve, with short-term rates at 3.6%, long-term rates (10 years) at 4.5%, and a slightly flattened one-year curve, with short-term rates above current levels, is anticipating Fed intervention in the form of a rate increase because of the strength of the economy. The fact that long-term rates remain close to current levels shows that this Fed action is seen as effective in containing inflation.
These are expectations that would allow investors to collect the coupon income offered by bond markets and generate capital gains in the event of an unexpected slowdown in the macroeconomic cycle (insurance against recession risk). Despite geopolitical tensions and the downward revision to growth forecasts, the first half of 2026 was marked by a sharp upward revision to corporate earnings.
In the eurozone (Eurostoxx index), earnings are expected to rise by 15% in 2026, after the stagnation seen in 2025 due to tariffs and continue increasing in 2027, although at a slower pace than in the United States and other regions with a larger technology weighting.
In the United States (S&P 500 index), 2026 earnings are expected to increase by 24% from 2025, and then by around 18% in 2027, thanks to the structural investment cycle in technology.
Globally, expected earnings growth for 2026 stands at 28%; this explains the roughly 12% rise in the MSCI AC World index over the first 6 months of the year.
This is a strong earnings-growth cycle, supported by investment in technology and artificial intelligence, which has enabled the economy and equity markets to offset geopolitical tensions and higher energy prices.
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