A. SREENIVASA REDDY (ABU DHABI)

AI-related investments are cushioning the impact of the oil shock caused by the US-Iran war, Fitch Ratings said in its latest Global Economic Outlook.

Fitch lowered its 2026 forecast for global growth by 0.2 percentage points to 2.4%, citing the ongoing geopolitical and oil crisis. It said world growth prospects had been hurt by the oil disruption prompted by the war, with higher inflation squeezing real wages, dampening consumption and raising companies’ input costs.

However, Fitch said the impact of the oil shock on global activity is being cushioned by stronger-than-expected momentum in AI-related IT investment, which is supporting world trade and Asian exports.

According to Fitch, US IT investment grew by 18% year-on-year in the first quarter of 2026, while global semiconductor sales values rose 80% year-on-year in March.

US capital goods imports jumped nearly 30%, while semiconductor exports contributed to strong first-quarter GDP readings in Korea and Taiwan.

“The oil price shock is hitting world growth prospects and increasing downside risks. But we are also amid a very pronounced boom in global spending on IT and that is cushioning the impact on activity in the near term, particularly in Asia,” said Brian Coulton, Chief Economist at Fitch Ratings.

Fitch lowered its 2026 growth forecasts for the US and the eurozone by 0.3 percentage points and 0.4 percentage points, respectively, to 1.9% and 0.9%. Growth in emerging markets excluding China was lowered by 0.2 percentage points to 3.2%.

China’s forecast, however, was raised by 0.3 percentage points to 4.6%, following better-than-expected data in the first quarter of 2026 and continued resilience in exports. Fitch also raised Korea’s forecast, saying its export prospects are benefiting from the boom in global technology spending.

The ratings agency said the closure of the Strait of Hormuz had lasted 14 weeks and assumed that it would not start to reopen until July.

Fitch revised its 2026 average Brent crude price assumption to $87 a barrel from $70 a barrel in its March outlook. It said the oil shock was a strong headwind to world growth, but added that its base case was far less severe than the oil shocks of the 1970s.

Real oil prices reached $170 a barrel in 1979, measured in current prices, while oil consumption as a share of world GDP has halved since 1980.