Economists from Standard Chartered, ABN AMRO, and Goldman Sachs have updated their inflation and growth forecasts for South Korea, China, and the United States, respectively, in response to rising oil prices linked to the ongoing conflict in the Middle East, particularly Iran. Standard Chartered raised its 2026 CPI inflation forecast for South Korea to 2.4% from 2.0%, with oil prices expected to average USD 85 per barrel. The bank also trimmed its 2026 growth forecast to 1.9% from 2.0%, citing the impact of higher oil prices on Korea's import-dependent energy structure, which could lead to rising import prices, a widening trade deficit, and slower economic activity. The 2027 forecasts for growth and CPI inflation remain unchanged at 1.8%, but downside risks persist if the conflict is prolonged and oil prices stay elevated [1].
ABN AMRO's analysis of China notes that the economy started 2026 strongly, with fixed investment rebounding to +1.8% year-on-year in January/February, compared to a contraction of -3.8% in 2025. However, the Iran conflict has increased downside risks, prompting a slight reduction in the 2026 GDP growth forecast to 4.6% (from 4.7%), while the 2027 forecast is raised to 4.5% (from 4.4%). Despite domestic excess supply, the spike in energy prices is expected to drive higher cost-push inflation in the coming months. CPI inflation had already reached a two-year high of 1.3% year-on-year in February, with core inflation at a seven-year high of 1.8% year-on-year [2].
Goldman Sachs projects that the Iran war will push U.S. inflation higher this year, primarily due to elevated oil prices. Their baseline scenario assumes Brent crude oil will average $105 per barrel in March and $115 in April, before falling to $80 per barrel in Q4 2026, assuming oil shipments through the Strait of Hormuz remain very low for six weeks. In more adverse scenarios, Brent could peak at $140 or even $160 per barrel, with persistent impacts on inflation. Goldman Sachs estimates that a 10% increase in oil prices raises headline PCE inflation by 0.2 percentage points and core inflation by 0.04 percentage points, mainly through transportation costs. The December 2026 PCE inflation estimate is raised by 0.2 percentage points to 3.1% in the baseline scenario, with adverse scenarios projecting even higher inflation rates. The PCE index was up 2.8% in January, and core PCE was up 3.1%, both above the Federal Reserve's 2% target, leading policymakers to hold off on rate cuts at recent meetings. Additionally, higher fertilizer prices could boost food prices by about 1.5% this year, raising headline inflation by 0.1 percentage point, and second-round effects could further increase inflation expectations [3].
According to Standard Chartered, South Korea's fiscal support, including a proposed KRW 25 trillion supplementary budget, may help offset some oil-driven headwinds, but risks remain if the conflict persists [1]. ABN AMRO notes that China's access to Russian energy and high oil buffers may cushion the impact, but indirect effects such as weaker global demand are still a concern [2]. Goldman Sachs highlights that the Federal Reserve faces a challenging environment, as elevated inflation readings have already led to a pause in rate cuts, and further oil price shocks could complicate monetary policy decisions [3].
CONCLUSION
The Middle East conflict has triggered a surge in global oil prices, prompting economists to raise inflation forecasts and trim growth outlooks for South Korea, China, and the United States. While some cushioning factors exist, the risk of prolonged conflict and sustained high oil prices poses significant downside risks to economic growth and inflation targets. Policymakers in affected countries may need to adjust fiscal and monetary strategies to address these evolving challenges.