The global economic landscape changed dramatically in March this year. The escalation of the conflict in the Persian Gulf has led to a rise in oil and natural gas prices. It is difficult to predict how long this period of higher prices will last. However, it is already possible to assess the initial effects of the rise in energy prices and the likely trajectories of the global economy — in 2026 and in the medium term.
At the start of the second quarter of 2026, global GDP growth is showing signs of slowing. The global Purchasing Managers’ Index (PMI) averaged 51.4 points in March—April — the lowest level since June last year. Following a sharp deterioration in March, global business activity recovered somewhat in April. However, the average PMI for March— April remains below the figures from the start of the year, indicating a weakening of momentum in the global economy following the energy shock. Output growth has slowed in both the manufacturing sector and the services sector.
The most notable slowdown is being recorded in sectors sensitive to energy prices and rising interest rates. These include property, construction, building materials manufacturing, tourism and transport.
Growth in producer prices, particularly input prices, is accelerating. The PMI Input Prices and PMI Output Prices indices have reached their highest levels since 2023. This points to heightened inflationary risks and risks of a deterioration in companies’ financial health.
A slowdown in economic activity is occurring primarily in Europe and, to a lesser extent, in the US. Asia’s leading economies — India, China and Japan — are maintaining more stable growth trajectories.
The eurozone is performing the weakest among the world’s major economies. In Q1 2026, GDP growth slowed to 0.8% YoY — down from 1.3% YoY in Q4 2025. The slowdown may continue in Q2.
Leading indicators suggest that the slowdown in activity in the eurozone will continue. In April, the composite PMI fell to 48.8 — its lowest level in over a year and a half. The services PMI stood at 47.6 — its lowest level in over five years.
Consumer demand in the eurozone is being negatively affected by rising energy prices. The economy’s sensitivity to this factor stems from its high dependence on energy imports, rising costs for businesses and households, and disruptions to established energy supply chains.
The eurozone’s manufacturing sector appears more resilient than the services sector. The manufacturing PMI stood at 52.2 in April, up from 52.0 in March, and remains in expansionary territory. This may be linked to increased military spending and a temporary rise in orders against a backdrop of accelerating inflation.
China continues to develop at a rapid pace. In Q1 2026, the country’s GDP grew by 5.0% YoY, following 4.5% YoY in Q4 2025. This acceleration is driven by export growth (up 9.8% YoY as of April), a revival in industry and the development of high- tech manufacturing.
Manufacturing activity in China remains strong, though domestic demand remains uneven. The composite PMI stood at 53.1 in April 2026. This is the highest level since June 2023.
High oil and gas prices are already putting pressure on the global economy: inflation has accelerated, and global GDP growth is showing signs of slowing. If the situation in the Middle East drags on and oil and LNG supplies from the Persian Gulf do not begin to recover, the consequences in the second half of 2026 could become more pronounced.
