The global economy is being pulled in two opposing directions. War in the Middle East is raising energy and commodity prices, threatening to weaken growth and revive inflation. At the same time, an investment surge linked to artificial intelligence is supporting demand, trade and financial markets. The International Monetary Fund now describes the outlook as resilient but increasingly uneven, with the two shocks operating at once.
The IMF projects global growth of 3.1% in 2026, down from 3.4% last year, before a modest acceleration to 3.4% in 2027. Global headline inflation is expected to rise to 4.7% this year and ease to 4.1% next year. Those figures suggest neither a global recession nor a return to comfortable stability: the expansion continues, but with less room for policy mistakes.
Two shocks, opposite effects
The energy shock works through a familiar mechanism. Higher oil and other commodity prices raise transportation, production and household costs, reducing purchasing power while forcing central banks to weigh inflation against weaker activity. Energy-importing and lower-income economies are especially exposed because they have less fiscal space to subsidize consumption or absorb the increase.
The AI boom pushes in the other direction. Spending on data centers, semiconductors, networking equipment and electricity infrastructure has become a major source of investment and cross-border trade. The IMF says AI-related demand is helping offset the drag from higher energy prices, particularly in economies hosting technology companies, chip production or large-scale infrastructure projects.
“The increase in the prices of energy and other commodities triggered by the war” is a negative supply shock, while the AI boom acts as a positive demand shock, the IMF said in its annual-meetings briefing.
That contrast also explains why headline global figures conceal sharply different national experiences. Countries benefiting from AI investment or favorable commodity terms may see stronger growth, while importers face deteriorating trade balances and higher living costs. The result is an uneven recovery in which resilience at the aggregate level does not necessarily translate into improved household conditions.
The vulnerability inside the boom
AI investment is not simply a free offset to geopolitical risk. It depends on exceptionally high expectations about future productivity and profits. If companies conclude that AI applications are delivering slower returns than anticipated, investment could fall quickly. Asset valuations could then adjust at the same time that companies cut orders, construction and hiring.
The IMF has modeled a downside scenario in which disappointment over AI productivity or profitability triggers a sharp correction in financial markets. In that case, global output could be 1.1% lower by 2028, with U.S. output 1.8% below the baseline. The danger is not that AI technology is useless; it is that prices and capital spending may run ahead of the economic gains that eventually arrive.
There is a competing interpretation. Strong technology investment can raise productivity, expand trade and create new industries, allowing the global economy to grow faster without the inflationary pressures associated with a purely consumption-led boom. From this perspective, today’s spending is the foundation for a durable expansion rather than evidence of a bubble. The disagreement centers on timing, valuation and how quickly productivity gains will spread beyond a small group of firms and countries.
Debt and interest rates narrow the options
Governments face the difficult task of cushioning households without adding enough demand to intensify inflation. The IMF says borrowing costs in advanced economies have risen to multi-decade highs, reflecting persistent inflation, expectations of stronger future growth linked to AI and concern about fiscal fundamentals. Higher yields make it more expensive to refinance public debt and limit the ability to respond to another crisis.
For central banks, the policy dilemma is equally sharp. Cutting rates too soon could prolong inflation if energy prices remain high; keeping rates restrictive for too long could expose highly indebted businesses, households and governments. A technology-led investment boom may also complicate the signal from conventional indicators, because strong capital spending can coexist with weak consumer demand.
What comes next
The immediate test is whether the Middle East conflict remains a contained energy shock or develops into a wider disruption to production and shipping. A sustained increase in oil prices would hit importers first and could force policymakers to delay monetary easing. A rapid de-escalation, by contrast, could remove some inflationary pressure and restore confidence.
The second test is the quality of AI investment. Markets will look for evidence that spending is producing measurable productivity gains rather than merely increasing the capacity of a few dominant companies. Governments will also face pressure to ensure that the benefits reach workers and smaller firms instead of deepening the divide between technology hubs and energy-dependent economies.
The IMF’s message is therefore less a forecast of imminent crisis than a warning about fragile balance. Growth can continue if energy disruption is limited, AI investment remains productive and governments protect fiscal credibility. If any one of those conditions fails—or if several fail together—the same forces supporting the economy could amplify its next downturn.