Is a global crisis approaching?

The talks between Iran and the U.S. don’t seem to have produced any tangible results so far. The Strait of Hormuz remains effectively off-limits for most vessels, and the situation has actually worsened. On the first day of the blockade, the U.S. Navy had to deploy six ships just to escort traffic out of the Persian Gulf.

And yet, oil prices aren’t spiking back to $100, as many seem to expect that the most intense phase of the conflict may already be over.

The only concerning sign is that the U.S. military presence in the region isn’t scaling down, suggesting the risk of escalation remains. If it materializes, the S&P 500, Nasdaq, and Dow Jones are unlikely to remain immune, at least in the short term. Later on, as we’ve seen before, another “TACO” rebound could always follow.

But setting speculation aside, let’s talk about the consequences of the U.S.-Israel conflict with Iran so far.

Starting with inflation, France has raised its forecast for this year to 1.9%. The Bank of Japan may also revise its outlook upward at its April meeting. In the U.S., the consumer price index rose by 0.9% seasonally adjusted in the month, bringing the annual inflation rate to 3.3%. While the latter was in line with expectations, we are still talking about a pickup in inflation.

The head of the IMF has also warned that central banks should be ready to raise interest rates if inflation keeps climbing. So far, the IMF has increased its global inflation forecast by 0.6 percentage points to 4.4% for 2026, and by another 0.3 points for 2027. For developed economies, the forecast now stands at 2.8%, up 0.6 points, while for emerging markets it’s 5.5%, up 0.7 points.

What about economic growth?

In its latest spring outlook, the IMF slightly revised global GDP growth down by 0.2 percentage points to 3.1% for 2026. The biggest downgrade came in the Middle East and North Africa, where growth expectations dropped sharply from 3.9% to 1.1%. Elsewhere, the revisions were more modest. The Eurozone was trimmed from 1.3% to 1.1%, the U.S. from 2.4% to 2.3%, and China from 4.5% to 4.4%.

In its risk scenario, the IMF warns that global growth could fall below 2% while inflation rises above 5%.

Why aren’t markets reacting?

Because “buy the dip” has become the default strategy. Investors are afraid of missing the rebound once the headlines turn positive. The problem is that markets have been running on this optimism for the past couple of weeks, while in reality, the situation hasn’t improved much.

As the new saying goes, it takes two to TACO, so this won’t be as easy to resolve as a trade war.