NAB Global Forward View: March 2026

19 March 2026
Economy and Markets

Global outlook weakens on Iran war; risks elevated

Key points

• The global economy entered 2026 on a solid footing. Ahead of the escalation of conflict involving Iran, the S&P Global composite PMI was at its highest level since mid-2024. A rebound from the Q4 impacted government shutdown and fiscal stimulus was expected to support US growth, domestic demand has been solid in the Euro-zone and Japan with further fiscal support to come, while China activity indicators strengthened over January/February. Financial conditions were also broadly supportive.

• The conflict in the Middle East represents a negative but highly uncertain shock to the global outlook. Its significance lies in the region’s central role in global energy supply. Our baseline assumes oil prices remain elevated in the near term but ease as disruptions partially unwind, with Brent settling around USD$80 per barrel in coming weeks. On this basis, global growth is expected to be around 3.2% in 2026 and 3.1% in 2027, modestly lower than previously forecast. Risks are skewed to the downside should energy prices remain higher for longer. If oil prices were to track at around $US100/barrel for the rest of this year, before easing in 2027, then quarterly yoy growth could dip towards 2.5% yoy.

• Net energy importers — particularly Japan, India and parts of Europe — face the largest growth headwinds, while energy exporters such as the US and Canada are better positioned, though still exposed as higher energy prices will still drag on many parts of their economies and via confidence, financial market and external demand channels.

• Uncertainty around US trade policy remains elevated. While the recent SCOTUS ruling has temporarily lowered average tariff rates, it does not materially alter the medium-term outlook. Any small gain from the lower tariffs will likely be offset by the increased uncertainty faced by business. Trade flows may also swing around in coming months as exporters seek to get ahead of attempts by the US to rebuild its tariff structure.

• For central banks, higher energy prices lift near-term inflation but weigh on growth, reinforcing a cautious approach and implying fewer, more conditional rate cuts if not the possibility of rate hikes. We have pushed back our expectations for the timing of Federal Reserve and Bank of England rate cuts. For the Fed, we now expect the next rate cut will be in Q4, and again in Q1 2027 (previously Q2 and Q3 2026). Core PCE inflation has been uncomfortably high in recent months, and the Fed will need to see evidence inflation is on a sustainable path back to target. It will also need to be assured that inflation expectations remain anchored even as energy prices rise, which will take time to assess.

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NAB Global Forward View: March 2026 (PDF, 1MB)