The global economy continues to expand, supported by the artificial intelligence (AI) boom, even as high energy prices, trade tensions, policy uncertainty, and structural challenges weigh on activity. Real global GDP growth is projected to slow from 3.3 percent in 2025 to 3.0 percent in 2026 before picking up to 3.1 percent in 2027 (see figure below), according to analysis presented at the Peterson Institute for International Economics Spring 2026 Global Economic Prospects event.
The disruptions associated with the Iran war—including to energy markets and supply chains—have lowered expected GDP growth, pushed up inflation, and made the outlook more uncertain. A two-week ceasefire announced earlier this week has eased tensions and brought energy prices down from their recent peaks, but they remain sharply elevated—still roughly 30 to 40 percent above pre-war levels. Markets remain highly sensitive to developments in the region, and uncertainty is high about whether the pause in fighting will endure.