Middle East Conflict Raises Recession Risk, Cuts Trade Growth

The Middle East conflict has increased recession risk and cut global trade growth forecasts for this year to between 2% and 5%, Allianz Trade reports. Exporters cite widespread supply-chain disruptions while companies accelerate shipments and broaden supplier networks to limit delays.

Ana Boata, head of economic research at Allianz Trade, warned that each additional week of fighting erodes corporate confidence and raises economic costs. Trade growth has been revised down from earlier forecasts near 10% to the current 2–5% range, with most of the remaining expansion reflecting higher prices rather than larger trade volumes.

Allianz Trade’s analysis found about 65% of exporters identified disruptions as a key concern. Availability is tightening for oil and gas, fertilizers, helium and aluminum, inputs used across agriculture, advanced technology and construction supply chains.

Companies are responding by front-loading shipments, building inventories of key materials and diversifying suppliers to reduce dependence on single sources. Firms point to the pandemic, the 2022 energy crisis and recent trade tensions as reasons for adopting these measures.

In a downside scenario with ongoing disruptions, Allianz Trade projects Eurozone growth could slow to about 0.2%. The firm also notes that sustained inflationary pressure may prompt central banks to raise policy rates further, which could weigh on U.S. equity markets toward year-end.

Regional differences are appearing. Asia looks comparatively resilient, with Singapore forecast to grow roughly 3% to 3.5%, which could partly offset weaker conditions in other regions. Freight flows, commodity prices and corporate inventory behavior will be watched for signs of stabilization or further strain.

Ana Boata warned: “Timing is critical. Each additional week of conflict erodes corporate confidence and increases economic costs.”