By 
The World Economic Forum (WEF) has warned of rising instability across global financial markets, as mounting geopolitical tensions and supply chain disruptions fuel expectations of heightened volatility across equities, private credit, and sovereign debt markets.
The warning forms a key highlight of the May 2026 edition of the Chief Economists’ Outlook report, released on Thursday, which points to a sharp deterioration in global macroeconomic sentiment and a reversal of the cautious optimism that characterised the start of the year.
According to the report, 68 percent of surveyed chief economists expect significant volatility in global equity markets over the coming months, reflecting growing investor concerns about geopolitical instability, energy markets, and global trade disruptions.
At the centre of these concerns is the continued closure of the Strait of Hormuz, a critical maritime route for global energy supplies, which has intensified fears of supply chain disruptions and renewed inflationary pressures.
Beyond public equity markets, financial instability is expected to extend into broader asset classes. The report found that 79 percent of chief economists anticipate rising distress and volatility within private debt markets, while 74 percent forecast increased fluctuations in public debt markets as governments and investors navigate heightened uncertainty.
Speaking at the report’s presentation, Saadia Zahidi, Managing Director of the World Economic Forum, said the global economic outlook has weakened considerably in recent months due to escalating geopolitical risks.
“Only months ago, the Chief Economists community was cautiously optimistic,” Zahidi said.
“The conflict in the Middle East changed that, and the economic scarring from the situation thus far is already expected to last into the months ahead. The longer the disruption lasts, the heavier the long-term cost for those who can least afford it,” she added.
Zahidi noted that while the global economy is not currently projected to slip into a full-scale recession within the next 12 months, economic resilience is becoming increasingly fragile as multiple risks converge.
Echoing similar concerns, Dr. Ayhan Kose, Director of Development Economics at the World Bank, warned that the closure of the Strait of Hormuz is emerging as a more significant macroeconomic threat than previous trade-related disruptions.
“Chief economists already rank the current closure duration of the Strait of Hormuz as significantly more disruptive than last year’s tariff turmoil,” Kose said.
“If the closure persists into the second half of the year, its impact could approach the severity of the COVID-19 crisis, compounding effects across global supply chains, energy, and food costs,” he added.
The report also highlighted widening regional disparities in economic resilience. While economies such as the United States and India are expected to withstand much of the external shock due to strong domestic demand, sub-Saharan Africa faces elevated vulnerability, particularly through inflationary pressures.
According to the survey, 94 percent of respondents expect global consumer prices to rise further, with sub-Saharan Africa projected to experience some of the highest inflationary pressures among all regions surveyed.
On technological transformation, the WEF noted that while businesses continue to accelerate investments in artificial intelligence, immediate productivity gains may not materialise as quickly as previously anticipated.
Although 92 percent of surveyed economists expect AI adoption to accelerate, the report said sectors such as engineering, healthcare, and utilities are likely to experience a slower transition toward measurable productivity improvements, limiting technology’s short-term ability to cushion economic pressures.
The findings underscore growing concerns that global markets may be entering a prolonged period of uncertainty, shaped by geopolitical risks, inflationary pressures, supply chain vulnerabilities, and tightening financial conditions.
Comments