By JBizNews Desk

June 1, 2026

The world’s leading economists are delivering one of their starkest warnings since the pandemic.

In its latest Chief Economists Outlook, released on May 28, the World Economic Forum reported that global business leaders and chief economists have sharply downgraded their outlook for the world economy, citing the ongoing closure of the Strait of Hormuz, rising energy costs, supply-chain disruptions, and mounting inflation pressures.

The numbers tell the story.

According to the survey, conducted between April 6 and April 17, 89% of chief economists now expect global growth to weaken over the next twelve months. More notably, 21% believe the slowdown will be significant rather than mild.

Just a few months ago, many economists entered 2026 expecting inflation pressures to ease and growth to stabilize. That optimism has largely disappeared.

The biggest concern is inflation.

An overwhelming 94% of economists surveyed now expect inflation to rise over the coming year as elevated energy prices and supply disruptions work their way through the global economy.

The source of those concerns lies thousands of miles away in one of the world’s most strategically important waterways.

The Strait of Hormuz, through which roughly 20% of global oil supplies normally pass, has remained severely disrupted since the outbreak of conflict involving Iran earlier this year. The closure has transformed what began as a regional geopolitical crisis into a global economic threat affecting consumers, businesses, investors, and governments worldwide.

The Forum’s economists ranked the current disruption as more economically damaging than many of the trade disputes and tariff battles that dominated headlines last year.

Several warned that if significant disruptions continue into the second half of 2026, the resulting economic effects could approach the scale of some of the supply-chain shocks experienced during the COVID-19 era.

Energy remains the most immediate transmission mechanism.

Higher oil prices increase transportation costs, manufacturing expenses, shipping rates, airline fuel bills, and food-production costs. Those increases eventually make their way into consumer prices.

For households, it means more expensive gasoline, groceries, utilities, and travel.

For businesses, it means higher operating costs, tighter margins, and greater uncertainty when planning future investments.

Despite the deteriorating outlook, economists are not yet forecasting a global recession.

Only 13% of respondents said a worldwide recession is likely.

That distinction matters.

The prevailing view among economists is not that the global economy is collapsing but that growth is slowing while inflation remains stubbornly elevated—a combination policymakers traditionally find difficult to manage.

The risks are also unevenly distributed.

Europe emerged as one of the regions most vulnerable to a potential period of stagflation, where weak economic growth coincides with persistent inflation.

That combination can leave central banks trapped between raising rates to fight inflation and lowering rates to stimulate growth.

The survey also highlighted growing concern across the Middle East and North Africa, where 88% of economists now expect weak or very weak growth conditions.

Sub-Saharan Africa was identified as the region facing the greatest inflation pressures due to its sensitivity to imported energy and food costs.

Amid the gloom, two major economies continue to stand out.

The United States and India were viewed as the most resilient large economies in the survey.

Economists cited strong domestic demand, relatively healthy labor markets, ongoing investment, and greater economic flexibility compared with many other regions.

India received particularly strong marks, with 52% of economists expecting strong or very strong growth over the next year.

Large-scale infrastructure projects, manufacturing investment, and population growth continue to support India’s economic expansion.

For multinational corporations deciding where to invest, the shifting outlook is already influencing strategy.

The Forum found that businesses are increasingly redirecting capital and supply chains toward regions viewed as more resilient, including the United States, India, and parts of Southeast Asia.

That trend reflects a broader reality emerging across global commerce: companies are no longer assuming economic risks are evenly distributed.

Instead, firms are building supply chains and investment plans around a more fragmented world.

There was one bright spot in the report.

A remarkable 92% of economists expect artificial intelligence adoption to accelerate during the next year.

However, expectations for immediate productivity gains have become more cautious.

While economists remain optimistic about AI’s long-term economic impact, many now believe the benefits will emerge gradually rather than through a rapid transformation.

For now, though, the dominant concern remains energy.

As long as the Strait of Hormuz remains constrained, oil markets will remain vulnerable, inflation pressures will stay elevated, and businesses will face higher costs.

The World Economic Forum’s message is clear: the biggest economic story of 2026 is no longer tariffs, interest rates, or even artificial intelligence.

It is a narrow stretch of water through which much of the world’s energy supply normally flows.

And until that bottleneck eases, economists expect the global economy to face a more difficult and more expensive road ahead.

Global Economy — JBizNews Desk

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