Bank of America Cuts Global Growth Forecast for 2026
In a note released on Wednesday, Bank of America revised its global economic outlook, lowering its 2026 growth forecast. The bank warned that the economic consequences of the Iran war are creating what it describes as a “mild stagflation” shock across the global economy.
Growth Downgraded as War Impact Builds
BofA analyst Claudio Irigoyen explained that the updated projections reflect the economic damage observed so far. The bank reduced its 2026 global growth estimate by 40 basis points, bringing it down to 3.1%.
Inflation Forecast Revised Higher
At the same time, Bank of America increased its global inflation forecast for 2026 by 90 basis points to 3.3%. According to the bank, the ongoing conflict is generating a stagflationary environment, where inflation rises faster than economic growth slows.
Tighter Global Monetary Policy Expected
As a result of higher inflation pressures, BofA now expects global central banks to maintain tighter monetary policies. Interest rates are projected to be approximately 30 basis points higher than previously anticipated.
Oil Prices Seen Driving Economic Pressure
Energy markets remain a key factor behind these revisions. Bank of America estimates that oil prices will average $92.50 per barrel this year, climb to around $100 per barrel throughout 2026, and then decline below $70 by late 2027.
The bank’s baseline scenario includes a supply deficit of 4 million barrels per day in the second quarter, followed by a smaller imbalance later in the year. However, in a more severe escalation scenario, oil prices could average $130 this year and spike above $150.
Impact Varies Across Major Economies
BofA highlighted that the economic shock is broad but uneven across regions.
In the United States, growth forecasts were reduced by 50 basis points to 2.3%, while inflation expectations were revised higher by 70 basis points.
The eurozone faces a sharper adjustment, with growth downgraded by 60 basis points and inflation forecasts rising by 160 basis points.
China, however, sees only a modest impact, with its growth outlook slightly reduced to 4.5%.
Rising Risk of a Recession Scenario
Bank of America also warned that risks remain elevated. The possibility of further escalation could significantly worsen economic conditions, with the likelihood of a recession now higher than what markets are currently pricing in.
