Global Economy Faces Uncertain Landscape Amid Geopolitical Turbulence

The global economy is facing an unusually uncertain landscape due to six powerful forces shaping it. Geopolitics, technology, and demographics are no longer background conditions but key macroeconomic drivers.

The conflict in the Middle East has disrupted energy markets and shipping routes through the Strait of Hormuz, affecting energy prices and inflation dynamics across the euro area. This has triggered stagflationary pressures on the euro area economy.

The European Central Bank (ECB) is closely monitoring the risk of second-round effects from the earlier energy-driven shock. Despite this, medium-term inflation expectations remain broadly anchored around 2% target, thanks to the ECB's monetary policy framework credibility.