The World Is Drifting Into a Stagflationary Regime

Schroders /

11-05-2026

Schroders argues the Middle East conflict has fundamentally altered the macro backdrop, pushing the global economy into a more stagflationary direction that markets still appear to underestimate.

Schroders cut its global GDP forecast to 2.5% for 2026, while raising global inflation forecasts sharply.
The firm expects oil to average around $100 per barrel through Q3, before gradually easing toward $70.
Unlike the 2022 energy shock, households now have less excess savings and governments have less fiscal room to cushion the blow.
The U.S. is viewed as relatively insulated due to its status as a net energy exporter, while Europe, the UK and Japan remain far more vulnerable.

What stands out is not simply the inflation call, but the asymmetry. Schroders sees central banks talking aggressively about inflation while simultaneously lacking the economic room to meaningfully tighten policy. That tension runs through the entire report.