Global Growth Forecasts Trimmed Amid Iran Conflict and Hormuz Blockade

Global equity markets have rebounded toward record highs following a ceasefire agreement and signals that the U.S. administration is seeking a diplomatic resolution to the conflict with Iran. Despite the rally, the geopolitical landscape remains precarious as a blockade of the Strait of Hormuz continues to disrupt the flow of approximately 25% of the world's oil supply. The primary concern for investors is the potential for a sustained energy shock similar to the 1973 oil crisis. Elevated crude prices create a ripple effect, increasing costs for retail goods, shipping, and aviation, which could dampen consumer spending and corporate margins across multiple sectors. The International Monetary Fund (IMF) has responded to these pressures by revising its global GDP growth forecast downward to 3.1%, from a previous estimate of 3.3%. The IMF's baseline for 2025 remains at 3.5%, contingent on a short-lived conflict. However, an 'adverse scenario' could see growth slide to 2.5%, while a worst-case projection—with oil averaging between $110 and $125 per barrel in 2027—could trigger a global recession. Sentiment among financial professionals remains mixed but cautiously optimistic. A Bank of America survey indicates that 70% of economists believe a recession is unlikely, despite this being the most bearish reading since June 2025. Conversely, Citadel CEO Ken Griffin warned that a closure of the Strait of Hormuz lasting six to 12 months would likely precipitate a recession. The current outlook suggests that while growth may slow, the immediate risk of a systemic collapse is lower than feared during the S&P 500's recent dip. Asia is expected to be the region most vulnerable to prolonged energy shocks.