A cut that splits the forecast in half
In early 2026, the United Nations trade and development body published a downward revision of its expectations that sums up, in a single figure, the change of climate in the world economy. In real terms, world merchandise trade growth is projected to fall from 4.7 percent in 2025 to between 1.5 and 2.5 percent. The figure implies that, in the worst of the contemplated scenarios, world trade would lose almost two-thirds of its momentum in a single year; even in the best, it would halve it.
The report attributes that slowdown not to an ordinary deceleration but to a change in the nature of the dominant risk. During the previous year, the main source of uncertainty was trade policy. The report points to a major shift in global risks: in 2025, uncertainty centered mainly on trade policy, but by early 2026 geopolitical tensions had become the main concern, especially as armed conflict in the Middle East raised concerns over energy flows and maritime transport. The nuance matters: the problem stopped being which tariffs governments impose and became whether the physical routes of trade remain open.
That shift of risk —from policy to geography— is what makes this year’s diagnosis different from previous ones. A tariff is a decision that can be negotiated, reversed or circumvented. A conflict that threatens a critical sea route is a risk of another scale, because it affects the physical capacity to move goods and energy. The world economy, according to the report, has moved from a scenario of trade friction to one of exposure to geopolitical shocks that no country controls alone.
The Strait of Hormuz: where geopolitics touches the economy
The epicenter of that exposure has a name and a precise location. The report identifies a sea route whose interruption has immediate global consequences. Conflict in the Middle East disrupted energy markets, financial conditions and major shipping routes, including the Strait of Hormuz, a critical route for global oil and gas trade. The Strait of Hormuz is one of those global trade chokepoints through which an enormous share of the crude and gas that moves the planet passes, and its vulnerability turns a regional conflict into a worldwide economic problem.
The interruption of that route is not an abstraction: it measurably altered the payment patterns of energy trade. One documented effect was the recourse to currencies and mechanisms alternative to the dollar to circumvent restrictions. Some ships made payments in renminbi via the CIPS system or in crypto-assets to transit the Strait of Hormuz in March and April 2026. That data point reveals a broader dynamic: when a critical route is strained, actors seek ways to keep operating, and those ways can slowly erode the role of dominant currencies and payment systems.
The impact on markets followed a pattern analysts recognize from previous episodes, and it is worth laying out precisely so as not to exaggerate. Since the ceasefire announcement, U.S. and emerging-market stocks reached new all-time highs, showing that markets can recover when investors see lower odds of a broader disruption. Markets tend to move from fear to evaluation once they can judge the real scope of the economic disruption. That pattern does not reduce the seriousness of the conflict, but it shows that the financial impact of a geopolitical shock depends as much on its real scale as on investors’ perception.
To that picture are added, in 2026, other fronts of uncertainty analysts watch in parallel. Investors are navigating many variables in 2026, adding geopolitical conflict to a change in Federal Reserve leadership and the midterm elections. The concurrence of those factors —an energy shock, a leadership change at the U.S. central bank and an electoral cycle— multiplies the sources of volatility and makes it hard to isolate each one’s effect. The risk that most concerns strategists is inflation: if energy prices rise and drag other goods along, higher borrowing costs could temper corporate earnings, in a chain that directly connects geopolitical conflict to the consumer’s pocket.
Why growth forecasts are moderating
The trade slowdown sits within a broader macroeconomic picture of moderate growth and persistent risks. Sector analyses agree on a scenario of apparent stability crossed by underlying tensions. Global economic growth will remain moderate, with relatively low inflation and falling energy prices; the eurozone economy will slow temporarily and recover later in 2026, while the United States faces stagflationary pressures from tariffs. Stagflation —weak growth with persistent inflation— is the risk analysts associate with the combination of tariffs and energy shocks.
Trade, however, had shown notable resilience before this slowdown, which qualifies the diagnosis. Trade and industrial production remained resilient through 2025 and into early 2026, but that momentum is weakening. This is not, then, a collapse, but the loss of a dynamism that had defied the previous year’s pessimistic predictions. In fact, trade had grown faster than the global economy in 2025, with AI-related trade as one of the most substantial engines of that growth.
That contrast —trade that first beat expectations and is now moderating— is what makes the current moment a turn worth tracking. The question the data leave is whether the weakening is a temporary correction tied to a specific geopolitical episode, or the start of a more prolonged phase of low trade growth. The report leans toward caution: it concludes that the world economy remains highly exposed to geopolitical shocks, energy disruptions and financial instability, suggesting the moderation could persist while those risks do not dissipate.
The inequality the African sun data reveals
One of the report’s most revealing findings is not in the trade figures but in a contrast that illustrates how energy shocks interact with global inequality. The report holds that the crisis strengthens the case for faster investment in renewable energy, and provides a figure to back it. A comparison of newly commissioned utility-scale electricity capacity showed that renewables were already cheaper than the cheapest new fossil-fuel alternative in 91 percent of cases in 2024. That is: clean energy is no longer just an environmental option but, in the vast majority of cases, the cheapest one.
But that economic argument clashes with a deeply uneven distribution of investment, and there the most striking figure appears. Africa is home to 60 percent of the world’s best solar resources but received only 2 percent of global clean-energy investment in 2024. That mismatch —the continent with the planet’s best solar resource capturing a minimal fraction of the investment— sums up one of the paradoxes of the energy transition: the resources are where the capital does not reach, and the capital concentrates where the resources are less abundant.
The relevance of that data point transcends Africa and closely touches regions like Latin America, equally rich in renewable resources and equally dependent on external investment to develop them. The report calls for stronger national and international policies to correct that mismatch, on the logic that an energy shock like that of 2026 functions both as a risk and as an argument to accelerate a transition that reduces exposure to fossil-fuel routes. The vulnerability of the Strait of Hormuz and the solar abundance of Africa and Latin America are, in that sense, two faces of the same problem: a world economy tied to a few fragile energy routes.
The realignment of trade along geopolitical lines
The 2026 slowdown does not occur in a static trade landscape but in one that had been reorganizing along geopolitical lines for years, a process sector analyses document in detail. Trade grew faster than the global economy, while advanced economies and China reoriented away from geopolitically distant trading partners, and AI-related trade emerged as the most substantial growth engine. That reorientation —buying and selling more to like-minded partners and less to geopolitical rivals— is the underlying trend on which the 2026 shock is superimposed.
The effect of tariffs on that reorganization is measurable and nuanced. Tariffs triggered a trade readjustment, with US-China trade falling by around 30 percent; the United States replaced about two-thirds of that gap with imports from other sellers, while Chinese exporters redirected their trade. The data show that trade does not disappear when barriers rise between two large economies but is redirected: flows find new paths, albeit with adaptation costs and a reconfiguration of the map of who trades with whom.
That capacity for redirection is, at once, a strength and a source of fragility. It is a strength because it shows the global trade system has resilience: when a route or relationship closes, alternatives emerge. It is a fragility because each redirection adds costs, lengthens supply chains and creates new dependencies that can prove just as vulnerable as the previous ones. The world economy of 2026, as the data suggest, is more resilient than pessimistic predictions anticipated, but also more exposed to a chain of shocks no actor fully controls.
Central banks and the test of reserve currencies
A little-visible but revealing thermometer of the impact of geopolitical shocks is how central banks react with their reserves. Intuition would say that, faced with uncertainty, reserve managers rapidly reorder their portfolios. The data show the opposite: notable caution. A striking result from a recent survey showed that over two-thirds of central banks that incorporated geopolitical risks into their reserve management made no changes in the currencies they invested in. That prudence reflects official managers’ traditional approach, avoiding abrupt changes to strategic benchmarks even amid heightened uncertainty.
The data qualify a frequent narrative: that of the dollar’s accelerated decline as a reserve currency. The reality of the flows is more stable than the headlines suggest. Fewer than 10 percent of central bank reserve managers cited U.S. tariffs as a factor affecting their reserve allocations in mid-2025, and recent market analysis suggests China, the world’s largest official reserve holder, has continued to accumulate dollars. The erosion of the dollar’s role, if it occurs, is a slow and gradual process, not a sudden reversal caused by a specific geopolitical episode.
At the same time, those shocks open windows of opportunity for alternative currencies, and there the euro appears as a case study. European leaders have identified the moment as an occasion to strengthen their currency’s international role. At the Euro Summit of March 19, 2026, euro-area leaders stressed that the euro’s position on the global stage will depend on Europe’s economic and geopolitical strength, as well as the EU remaining a reliable partner. The logic is that global instability creates demand for alternatives, and that the euro could capture part of it if Europe consolidates its economic and institutional credibility. It is a conditional opportunity: it depends on political decisions still to be made.
What it means for exposed economies
For economies that neither set the rules of global trade nor issue reserve currencies, the 2026 slowdown poses a particular challenge. Countries dependent on commodity exports or energy imports end up on the most vulnerable side of the equation: they suffer price volatility without the capacity to influence the geopolitical causes that provoke it. When a route like the Strait of Hormuz is strained, the cost of energy rises for everyone, but the blow is harder for those with the least margin to absorb it.
That asymmetry is what turns the debate over the energy transition into something more than environmental for those economies. Reducing dependence on imported fossil fuels is not just a climate goal: it is a shielding strategy against recurring geopolitical shocks. For regions with abundant solar, wind or hydroelectric resources, developing their own renewable capacity amounts to reducing their exposure to the fragile routes the report identifies as the main risk. The obstacle, as the African sun data shows, is not a lack of resource or of profitability, but the concentration of investment in other latitudes.
The balance of the data
The 2026 world-trade slowdown condenses, in a forecast revision, the change of nature of global economic risk. The central figure —a fall in merchandise trade growth from 4.7 percent to 1.5-2.5 percent— reflects that the main driver of uncertainty is no longer tariff policy but the geopolitical conflict that threatened critical routes such as the Strait of Hormuz. Trade has not collapsed, but it has lost much of the dynamism that had defied the previous year’s predictions.
The verdict the data leave is of a world economy caught between two forces: a notable capacity for adaptation —trade redirects when routes close, markets recover when uncertainty clears— and a structural exposure to shocks beyond its control. The African sun figure —60 percent of the best resource, 2 percent of the investment— illustrates that the deep solutions, such as accelerating the energy transition to reduce dependence on fragile routes, exist but are not financed where they are most needed. For Latin America, rich in renewable resources and exposed to the same shocks, the message of the data is twofold: the region is vulnerable to the disruptions that slow global trade, but it also has in its resources a way to reduce that vulnerability, if it manages to attract the investment that today concentrates in other latitudes. The economy of 2026 is not one of collapse but of exposure: resilient, adaptable and, at the same time, deeply dependent on a few fragile routes staying open.