Global Economics: HSBC sees resilient global growth giving way to tighter financial conditions as energy shocks and AI-led divergence intensify.

Overview

This global macro outlook examines how an energy shock, synchronised monetary tightening, fading fiscal support and an uneven AI investment boom shape growth, inflation and financial-market risks through 2028.

Core views

HSBC says global activity was more resilient than expected in Q2 2026, including in Europe and energy-importing Asian economies. Temporary lower oil prices after the June US-Iran memorandum, fiscal support, and an AI-led surge in investment and trade supported demand. These stronger first-half outcomes lift the 2026 global GDP forecast to 2.7% from 2.5%, while the 2027 forecast remains 2.7%. The institution nevertheless expects growth to moderate later in 2026 as higher energy prices and policy rates reduce real disposable income and raise borrowing costs. Fiscal support that helped households, defence and infrastructure spending is also expected to fade in the US, Europe and many other economies in 2027. The report identifies the Middle East conflict and disruption to Strait of Hormuz flows as the central source of renewed inflation risk. Brent was around USD100 per barrel at publication, approximately USD30 per barrel above three months earlier; European gas prices were about 150% above pre-war February levels, while diesel and freight costs also rose. Inventories and lower Chinese oil imports had initially cushioned supply disruption, but falling US inventories and a possible reversal in Chinese import demand leave short-term oil risks skewed upward. Energy remains the principal driver of headline inflation, but persistent fuel, shipping and food-input costs could eventually compress margins and broaden price pass-through. HSBC raises its 2027 global inflation forecast to 3.3% from 3.1%. It judges that underlying inflation has not yet broadly accelerated in advanced economies because wage growth has slowed, labour markets are less tight than in 2022, and companies have so far absorbed much of the cost pressure. In the US, wage growth slowed to 3.1% year-on-year in September and unit labour-cost growth was 1.3% year-on-year in the first half of 2026. However, food inflation is expected to become more important in 2027 as higher fertiliser and diesel costs affect harvests, while El Niño could intensify food-price pressures. HSBC forecasts eurozone HICP inflation at 3.8% year-on-year in September and a peak around 4.1% near year-end. Central banks are tightening primarily to preserve inflation-fighting credibility and prevent supply shocks from feeding into expectations and second-round effects. HSBC expects one further 25bp increase each from the Fed and Bank of Japan, two more from the ECB and RBA, and Bank of England hikes of 25bp in November and February to take Bank Rate to 4.25%, followed by reversals from August 2027. It has added rate increases for seven central banks previously expected to remain on hold, and now expects rises from 17 of 28 covered central banks. The policy path remains highly dependent on energy: if Hormuz flows remain near 30% of pre-war levels, inflation pressure could require further tightening; a durable ceasefire restoring flows to 70-80% of pre-war levels could create an oil surplus and allow tightening to be reversed. Fiscal conditions are another vulnerability. HSBC argues that high inflation, higher rates, slower growth and expanding spending demands are worsening public-debt dynamics while governments have generally not set credible medium-term consolidation plans. The US fiscal impulse is expected to turn negative in 2027 after 2026 tax rebates, while the debt limit of USD41.1trn will likely need to be raised earlier in 2027. Higher Japanese rates and a stronger yen could encourage repatriation of Japanese savings from foreign assets, affecting JPY, JGBs, US Treasuries and carry trades. HSBC also cautions that AI-driven productivity alone may not resolve fiscal pressures because government revenue relies heavily on labour income: corporate tax revenue accounts for less than 10% of US federal revenue. AI is the report's major countervailing growth force. Multi-year commitments, supply bottlenecks and continued global buildout mean AI capex and trade should remain elevated through 2027-28 even if frontier-model development slows over safety concerns or financing costs rise. The US hosts roughly three quarters of global AI computing capacity; Taiwan's 2026 GDP forecast is 11.0%, and HSBC sees AI investment supporting exports, commodity demand and activity across the US, Korea, Taiwan, mainland China and other Asian economies. However, gains are concentrated in technology-linked investment and exports rather than broad domestic demand, notably in mainland China and several Asian economies. HSBC frames AI's next phase through buildout, uncertain productivity and labour effects, and financial-market spillovers. Adoption remains uneven by firm size and sector, so reported use does not necessarily mean AI is embedded in workflows. Its central expectation lies between a modest and substantial adoption scenario: productivity gains should build, but the scale and timing are uncertain, while knowledge-work job losses and cybersecurity spending could offset benefits. An AI-related equity correction would weaken wealth-sensitive US consumption and global investment; HSBC estimates US growth could be mechanically 0.5-0.6 percentage points lower if the expected AI investment boost disappeared. The report also notes that US equities and related Asian technology shares, data-centre-linked commodities such as copper, and globally held pension and mutual funds could all be affected. For 2028, HSBC's baseline remains trend-like rather than pre-pandemic growth, reflecting trade frictions, slower labour-force growth and high debt. It forecasts 2.7% global growth and 2.6% global inflation. Downside risks include prolonged conflict, volatile commodity prices, supply-chain disruption, persistent inflation, further tightening and an AI asset-price correction. Upside risks include a durable US-Iran ceasefire, lower energy prices, improved trade relations and stronger AI-driven productivity gains.

Analysis framework

HSBC combines country forecasts, GDP- and PPP-weighted global aggregates, high-frequency activity indicators, energy-price developments, fiscal-policy assumptions and central-bank reaction functions. It then tests the outlook against alternative energy-flow and AI-adoption scenarios, tracing the effects through inflation, real incomes, rates, investment, trade, employment, public finances and asset prices.

Methodology notes

• Industry AnalysisSupply-demand framework

  Energy supply disruption and demand response

  The report links Strait of Hormuz flows, inventories, oil imports and refined-product prices to global energy inflation, consumer purchasing power and growth.

• MacroeconomicsCredit and Debt Cycle

  Fiscal sustainability and interest-rate transmission

  HSBC assesses how higher yields, debt stocks, fiscal deficits and borrowing costs affect public finances, households and investment.

• Other

  Scenario analysis for AI adoption and energy normalisation

  The report compares modest, substantial and extreme AI outcomes and contrasts prolonged disruption with a durable restoration of Strait of Hormuz flows.

Key data

• Global GDP growth forecast2.7% in 2026; 2.7% in 2027; 2.7% in 20282026 forecast raised from 2.5%; 2027 unchanged.
• Global inflation forecast3.8% in 2026; 3.3% in 2027; 2.6% in 20282027 forecast raised from 3.1%.
• Brent crude benchmarkAround USD100 per barrelApproximately USD30 per barrel higher than three months earlier.
• European natural gas pricesAbout 150% above pre-war February levelsStorage is low entering the European autumn.
• Expected central-bank tighteningRate rises from 17 of 28 covered central banksSeven were previously expected to remain on hold through H2 2026 and 2027.
• US unit labour-cost growth1.3% year-on-year in H1 2026Compared with a peak above 5% in 2022.
• Taiwan GDP forecast11.0% in 2026; 5.4% in 2027; 4.9% in 2028AI-related exports and investment are the principal drivers.

Impact & implications

HSBC expects the resilience created by fiscal support and AI investment to become less broad as energy costs, higher rates and fading fiscal impulse constrain households and conventional investment. The report sees AI supply chains and infrastructure as important supports to trade and capex, but warns that their concentration makes global activity more exposed to a reversal in AI investment or equity valuations.

Risks

• A prolonged Middle East conflict and sustained disruption to Strait of Hormuz flows could raise energy costs, inflation and recession risk.
• Energy, food and shipping costs could produce broader second-round inflation effects and force more monetary tightening.
• Fading fiscal support, high public debt and rising yields could weaken growth and worsen fiscal sustainability.
• An AI investment or equity-market bubble could reverse investment, trade, wealth effects and technology-linked commodity demand.
• AI adoption could displace knowledge workers faster than new employment is created, while cybersecurity costs could offset productivity gains.

What to watch

• Oil, gas, diesel and freight prices, global inventory levels, and the pace of Strait of Hormuz traffic recovery.
• The extent of energy-cost pass-through into food prices, company margins, wages and core inflation.
• Central-bank guidance and the timing of further tightening or reversal, especially at the Fed, ECB, BoE and BoJ.
• The 2027 fiscal impulse, debt-limit developments, long-term government yields and Japanese investor repatriation risks.
• AI capex commitments, supply bottlenecks, adoption rates, labour-market effects and signs of stress in AI-linked asset valuations.