The UK economy risks losing the momentum it had gained in Q2 2026 due to a major energy shock. According to a fresh Deutsche Bank forecast, escalation of the conflict around Iran will sharply cut household incomes and provoke an operational crisis across the corporate sector. Deutsche Bank’s chief UK economist Sanjay Raja noted that after a vigorous upturn in late winter, domestic GDP slipped slightly into negative territory in April, and macroeconomic risks continue to tilt toward deterioration. Analysts expect only modest 1% GDP growth for the full year. GDP in the current quarter is projected at 0.1%, rising to just 0.2% in the second half of the year.

The UK’s key driver — the services sector — contracted by 0.1% month‑on‑month in April. Retail sales of motor fuel plunged 10.2% as pump prices soared, the weakest reading since November 2020. Consumers began to cut back spending, pushing clothing sales down 2.4%. The only local support came from car retail and wholesale, where new registrations jumped 24% year‑on‑year. The hospitality sector fell 0.4%: pub turnover dropped 0.2% while the restaurant sector recorded a marginal 0.1% rise after 2.5% growth in March.

The industrial picture is mixed. Industrial production retained only a minor momentum and rose 0.2%, helped by a 2.5% increase in domestic oil extraction, while manufacturing output declined 0.2%. The deepest slump was in construction, where output fell 0.7% month‑on‑month and was 1.7% below last year’s levels. The construction PMI collapsed from 45.6 to 39.7, one of the worst readings since the pandemic. Experts conclude that with unemployment set to rise to 5.4% by late summer and a fresh wave of inflation, real household incomes are likely to continue shrinking.

Japan, the world’s fourth‑largest economy, has reported a sharp acceleration in wholesale (industrial) inflation. According to Kyodo News, the country’s wholesale price index surged to 6.3% year‑on‑year last month, marking a three‑year high. The main driver of this powerful inflationary pressure was the ongoing armed conflict in the Middle East, which pushed up the cost of imported commodities and petroleum products. By comparison, wholesale inflation stood at 5.3% in April. This rapid rise in factory gate prices has cemented investor expectations of a swift and significant tightening of monetary policy by the Bank of Japan.

The macroeconomic picture has raised serious concerns among experts. Former BOJ board member Makoto Sakurai issued a stark warning, saying Tokyo risks repeating historical mistakes that previously plunged the country into years of stagnation. In his view, the odds are high that the Asian economy is on the verge of stagflation amid soaring prices and sluggish GDP growth. Sakurai stressed that the regulator risks falling irrevocably behind economic reality and losing control of inflation if it refuses to raise its key interest rate immediately at its June meeting.

The situation is compounded by profound weakness in the national currency, which further pushes up import costs. FX market tension peaked at the end of May, when Japanese authorities were forced into large‑scale foreign‑exchange interventions to support the sapped yen. Tokyo spent a record $73.6 billion defending the currency, yet fundamental pressure on the economy persists due to high global energy prices.

The People’s Bank of China has recorded an increase in its official gold reserves for the nineteenth straight month as of May, continuing the longest uninterrupted gold-buying campaign since at least 2015. According to data from the regulator published by Bloomberg, state reserves in China rose by an additional 320,000 troy ounces last month. Notably, Beijing’s steady accumulation of gold persists despite the fact that global prices experienced their third consecutive monthly decline in May, coming under significant pressure after reaching record historical highs in late January.

The primary factor keeping gold prices in check remains persistent inflation concerns and investor expectations that global interest rates will stay elevated longer than previously anticipated. Rising government bond yields traditionally reduce the appeal of non-yielding safe-haven assets. Nevertheless, stable demand from the official sector has emerged as a key source of market support in recent years. Massive purchases by central banks effectively counterbalance periods of temporary weakening in private investor interest and help smooth market volatility.

China’s efforts to diversify its reserves are being closely monitored by the international community, as the world’s second-largest economy seeks to reduce its reliance on traditional dollar-denominated assets. Analysts at Goldman Sachs indicate that amid rising geopolitical uncertainty, purchasing activity by global central banks may accelerate in the coming months. Current statistics underscore Beijing’s long-term commitment to expanding its gold reserves, despite the challenging macroeconomic environment.

US President Donald Trump publicly said he would like to see rate cuts in the country, but stressed that the final decision at the October meeting will rest with new Federal Reserve Chair Kevin Warsh. Speaking to reporters, the White House chief confirmed his intention for easier monetary policy to stimulate national economic growth. At the same time, Trump noted that he does not mean to put direct pressure on the Federal Open Markets Committee, giving the chairman full freedom to assess macroeconomic risks ahead of the autumn meeting. The statement is worthy of note against the backdrop of Trump’s long‑standing practice of publicly criticizing financial authorities.

Kevin Warsh officially took office as the 17th chair of the Federal Reserve on May 22, 2026, replacing Jerome Powell, whose term ended in mid‑May. Before the appointment, Trump had regularly slammed the Fed’s previous rhetoric and Jerome Powell personally for refusing to lower borrowing costs and for maintaining tight monetary policy amid rising inflationary pressures. The US leader repeatedly accused the regulator of artificially slowing the pace of the economy. Many analysts viewed Warsh’s nomination as an attempt by the White House to reset the central bank’s course. However, during confirmation hearings at the Senate, the new chair firmly pledged to uphold the Fed’s institutional independence from the executive branch and to base decisions solely on hard data rather than political requests from the administration.

For the first five months of 2026, trade between the United States and China has declined, while Beijing’s trade volumes with Europe have seen significant growth. According to data from China’s General Administration of Customs, US-China trade dropped by 3.5% from January to May, totaling $231.25 billion. Exports of Chinese goods to the US fell by 2.7% to $172.46 billion, while imports of American products into China decreased by 5.5%, reaching $58.78 billion.

Conversely, China’s economic relations with its European partners exhibit a different trend. During the same period, China’s trade with the European Union countries expanded by 13.9% year-over-year, reaching $364.15 billion. Shipments of Chinese goods to EU nations surged by 16.4% to $253.97 billion. Imports of European goods into China also demonstrated positive momentum, increasing by 8.6% to $110.19 billion. This clearly indicates a reorientation of trade flows.

Despite these upward trends, the cooperation between Beijing and Brussels is threatened by the risk of large-scale trade conflicts. According to China Daily, the EU’s protectionist measures aimed at safeguarding its green economy have significantly undermined China’s exports of environmentally friendly products and limited the influx of investment. If the EU continues to erect barriers, Chinese businesses may lose their willingness to enter the local market. If this policy persists, Beijing warns of inevitable retaliatory measures to protect its corporations.

US President Donald Trump said during an online briefing on June 8 that the military conflict in the Middle East would be over soon. According to the American leader, the United States is close to officially declaring a complete victory over Iran, which will take place within the next two weeks. Mr. Trump claims that US armed forces have successfully destroyed all of Tehran’s military and missile capabilities and eliminated its top leadership. As a result, the president promised a sharp fall in global oil prices once the fighting ends.

The optimistic remarks from the White House came after Israel and Iran, at Washington’s request, agreed to a temporary halt to recent local clashes. That news entailed some downward pressure on energy markets, but prices remain significantly above levels seen at the start of the year. The war between the US‑Israel coalition on one side and Iran on the other has now been going on for four months, despite regular statements from the American administration that peace is imminent. Tehran flatly rejects Trump’s assertions and effectively suspended its participation in indirect talks with Washington last week.

The situation is further complicated by regional demands: Iran insists that the issue of Lebanon, which has been the target of an Israeli campaign, be included in any comprehensive peace agreement. Remarkably, contrary to claims that Tehran’s military capability has been destroyed, Iranian forces continue to carry out targeted strikes against American and allied targets in the Middle East. On top of that, the strategically important Strait of Hormuz remains largely blocked to free navigation.

The eurozone faces a sharp economic slowdown in 2026 amid an energy crisis stemming from the Middle East. Deutsche Bank Research has downgraded its GDP growth forecast for the region by more than half — from 1.1% to 0.5%.

The bank expects the European economy to contract by 0.1% in the second quarter, to stagnate in the third, and to register only modest growth by year end. The shock to the eurozone stems from falling purchasing power, weak global demand for exports, and costly credit. Deutsche Bank estimates that higher energy import bills alone will eat up roughly 1% of European GDP.

Inflation will accelerate to 3.1%, versus a precrisis expectation of 1.7%. To bring prices down, the European Central Bank will be forced to continue a measured tightening cycle and is forecast to raise the deposit rate by a total of 50 basis points to 2.50% by September.

Outlooks for the bloc’s largest economies are bleak. Germany’s GDP is projected to grow only 0.5%, funded in part by a swollen budget deficit of 4.1%. France is expected to post similar growth but with a deficit above 5%. Italy is the laggard at 0.4%, supported only by a remaining €72 billion package of EU crisis subsidies. Against this backdrop, the United Kingdom looks comparatively stronger, with expected growth of 1% and stable Bank of England policy rates.

Deutsche Bank warns the scenario could worsen. If the Strait of Hormuz remains blocked all summer, eurozone growth in 2026 will fall to zero, and inflation may spike to 3.5%.

Citi’s analyst Scott Chronert upgraded his S&P 500 target from 7,700 to 8,100 points for the end of 2026. The aggressive revision is based on a large acceleration in corporate profitability rather than a speculative expansion of valuation multiples. Citi anticipates index‑level earnings of $350 in 2026. Besides, the indicator was raised to $400 for 2027.

The engine of fundamental growth is a unique supercycle of capital spending on AI infrastructure. The bank estimates the market is currently in the middle phase of this structural transition. Massive tech investments have pushed the share of profits from fast‑growing sectors to 45% of the market’s total, up from 15% three decades ago. At the same time, Citi’s model factors in an inevitable compression of P/E multiples as the AI industry matures, shifting the burden of further index gains squarely onto the actual delivery of net‑profit plans.

Citi’s new projections come amid extreme market turbulence. On June 5, the S&P 500 plunged 2.64%, closing at 7,383.74 — the worst one‑day sell‑off since October, wiping out $1.8 trillion in market value. Wall Street is now forced to balance long‑term optimism from the AI boom against persistent inflationary pressure from Middle East conflicts and the unexpectedly strong US nonfarm payrolls for May, which have raised concerns that the Federal Reserve may hike interest rates again.

The US Treasury has identified a bizarre funding source to finance the reconstruction of Persian Gulf states after the large‑scale 2026 war. Washington is considering confiscating frozen Iranian assets to pay for repairs to Arab infrastructure damaged by Tehran’s missile strikes.

US Treasury Secretary Scott Bessent has ordered a full audit of the financial and physical damage inflicted on regional allies. A special task force is assessing the impact of the attacks to determine lawful mechanisms for transferring seized Iranian funds to compensate for losses suffered by partners in the Gulf Cooperation Council.

The scale of the damage is estimated in billions of dollars. During the recent conflict provoked by precision strikes by the US and Israel, Tehran launched thousands of ballistic missiles and drones at countries hosting US military bases. Critical infrastructure in Saudi Arabia, the UAE, Kuwait, Bahrain, Jordan, and Qatar was seriously hurt, including Prince Sultan Air Base and Qatar’s largest LNG facilities.

The economic shock from the disruption of energy supply chains was so severe that it triggered a liquidity crisis. As Bessent acknowledged, already in April, amid trading disruptions, several of the Gulf’s wealthiest monarchies were forced to urgently request currency swaps from Washington to rescue and stabilize their local markets. Now, the US administration plans to place the financial burden of recovery on Iranian assets.  

Federal Reserve Chairman Kevin Warsh’s assertion that artificial intelligence will serve as a powerful disinflationary force is at odds with current macroeconomic data, according to analysts at BCA Research.

Warsh compares the present situation to the actions of Alan Greenspan in 1996-1998, when the former Fed chair held off on interest rate hikes in anticipation of productivity gains. However, BCA calls this historical comparison misleading. The primary driver of the late ‘90s disinflation was a collapse in oil prices to $11 per barrel, along with falling metal and agricultural prices, rather than a technological leap. Furthermore, the Fed’s own NAIRU estimates during that period were overstated, masking actual inflationary pressures.

In contrast, the current boom in AI investment is actively driving inflation upward. In the first quarter of 2026, capital expenditures by American tech firms reached 4.9% of GDP, surpassing the historical peak of the dot-com era in 2000. Equipment shortages, rising energy costs, and increased memory chip prices have already begun to translate directly into higher retail prices for consumer electronics.

An additional factor contributing to inflation is the wealth effect. According to the Fed, American households have accumulated $75 trillion in stocks, which is 230% of GDP compared to 130% at the peak of the Internet bubble in 2000. The personal savings rate has plummeted to 2.6%, well below the 2019 average of 7.3%. This supports elevated consumer spending, despite real disposable incomes having declined by 1.1% since April 2025.

Theoretically, Warsh’s logic is also vulnerable. Using the Solow growth model, BCA economists argue that rising productivity, a short depreciation cycle for AI assets (3 to 5 years versus the standard 11 years for non-residential fixed assets), and an increasing capital share in income point to an inevitable rise in the equilibrium real interest rate, rather than a decline.

While Kevin Warsh continues to assert in his columns for the Wall Street Journal that AI will conquer inflation, the CPI swap market predicts that inflation will remain above the Fed’s 2% target for at least the next two years. BCA sees only two unlikely scenarios in which AI could lead to lower rates: a sudden pullback in AI spending or catastrophic wealth inequality that would bolster the overall savings rate among the wealthy.

Data showed the US economy added 172,000 jobs in May, far exceeding analysts’ consensus forecast of a modest 85,000. According to the Bureau of Labor Statistics report, the American labor market remains robust despite the inflationary shock stemming from the protracted military conflict in Iran.

Adding to the hawkish sentiment on Wall Street was a significant revision of previous jobs data. The April employment figure was revised up from 115,000 to 179,000, while the March figure was raised from 185,000 to 214,000. This means that over the last two months, the economy recorded 93,000 more jobs than previously estimated. The primary gains came from the public sector, healthcare, and the hospitality industry, while the financial sector reported job losses.

This data has prompted markets to urgently reassess their expectations for the Federal Reserve’s monetary policy. Traders are now pricing in at least one interest rate hike by the end of 2026, whereas earlier, investors anticipated that borrowing costs would remain unchanged, with tightening pushed to early 2027. The unemployment rate remained steady at 4.3%, and average hourly earnings increased by the expected 0.3%. Analysts believe that this will prevent the regulator from taking overly aggressive measures.

The bond market reacted immediately to the strong report. The yield on two-year US Treasury bonds, which are most sensitive to the Fed’s rate trajectory, jumped by 6.5 basis points to 4.115%. Meanwhile, the yield on the benchmark 10-year Treasuries rose by 5.3 basis points, closing at 4.53% compared to 4.477% prior to the jobs report’s release.

Nowadays, central banks allocate more funds to gold reserves than US Treasuries, depriving them of their status as the world's primary reserve asset. The Financial Times, citing the European Central Bank (ECB), reports that the share of the precious metal in central bank portfolios reached 27% by the end of 2025. Over the year, this figure surged by 7%, while the share of US government debt fell from 25% to 22%. The shift in the international financial architecture and the decline in confidence in US government debt were a direct consequence of geopolitics.

The search for alternatives to the US dollar accelerated sharply after 2022, when the US and EU froze Russia's sovereign reserves. That precedent showed central banks worldwide the risks of holding wealth in fiat currencies abroad. Gold, free from third‑party counterparty risk, became the main defensive instrument amid trade wars. Strong demand from regulators and investors led to a record rally: in 2025 alone, the metal skyrocketed by 65%. This caused a sharp increase in the value of central bank gold holdings on their balance sheets, even without new purchases.

The effect of these tectonic shifts in commodity markets was vividly illustrated by Russia. Since February 2022, EU countries have captured roughly €210 billion ($244 billion) of Russian sovereign assets. However, Russia’s unexpected gains from the revaluation of its own gold reserves reached $216 billion. Those proceeds effectively offset the value of funds frozen in the West. The situation clearly demonstrated the vulnerability of sanctions in the face of a global flight of financial institutions into tangible assets.

The administration of US President Donald Trump is considering imposing additional import tariffs ranging from 10% to 12.5% on 60 countries. According to Reuters, the primary justification for these stringent protectionist measures stems from Washington’s accusations that key trading partners fail to limit the circulation of goods produced using forced labor. This initiative follows an extensive investigation by the Office of the United States Trade Representative (USTR). According to US Trade Representative Jamieson Greer, the current tolerance of foreign governments for these practices is unacceptable, as it places American workers at a significant disadvantage in the global market, forcing them to compete directly with producers that violate human rights.

Under the plan developed by the agency, the 10% tariff would affect a broad group of countries and regional blocs, including Canada, Ecuador, European Union member states, Indonesia, Mexico, Pakistan, Argentina, Bangladesh, Cambodia, El Salvador, Guatemala, Malaysia, Taiwan, and the United Kingdom. For another 45 countries, whose market regulation and anti-exploitation policies have been deemed least effective by US authorities following special reviews, higher tariffs of 12.5% would be applied. The White House emphasizes that these new tariffs aim to level the playing field in international commerce and compel partners to enhance oversight of their supply chains.

This current wave of tariff actions by Washington is part of a broader and more aggressive strategy by the Trump administration to revise global trade relationships. Previously, the US announced plans to impose a special 25% tariff on certain categories of goods from Brazil, accusing the BRICS nation of engaging in unfair trade practices. International economic analysts note that invoking the issue of forced labor allows the White House to find new legal justifications for erecting protectionist barriers around the American economy, despite significant discontent from European and Asian capitals.

The international fund known as the "Board of Peace," initiated by Donald Trump to finance the post-war recovery in Gaza, has found itself in a deep legal and political deadlock. Despite global leaders and donors, including Russian President Vladimir Putin, publicly pledging a total of $17 billion to the organization, not a single cent has been deposited into its accounts to date. According to the Financial Times, citing informed sources, the actual status and functionality of the fund remain completely opaque. Insiders suggest that Trump views the project more as his "private royal court," while in practice, the fund has failed to secure any contracts for construction or security provisions in the Middle Eastern region.

The idea to create the project was first announced by Trump in September 2025 as part of a conflict resolution plan with Israeli Prime Minister Benjamin Netanyahu. In November 2025, the initiative gained international recognition when the UN Security Council passed Resolution 2803, granting the "Board of Peace" the authority to act as a transitional administration for Gaza until the end of 2027, thereby legally opening the project to access the US federal budget. In January 2026, Trump launched the organization with his characteristic fanfare, calling it "the greatest board ever assembled." However, the White House’s excessive ambitions immediately raised significant concerns in European capitals, where the new structure was seen as a direct attempt by Washington to create a controlled competitor to the UN.

According to the organization’s charter, standard membership is set for three years, but participants can secure a lifetime seat on the board for a one-time contribution of $1 billion. As of May 2026, the official founders include 28 countries, among them Persian Gulf states, Turkey, Kazakhstan, and Belarus. Recently, Trump’s son-in-law Jared Kushner presented his futuristic project "Project Sunrise" in Davos, envisioning a major transformation of the Gaza coastline into a technological resort and an economic hub by 2035. Experts estimate that the region will require $70 billion over the next decade. However, a special fund managed by the World Bank remains empty due to the reluctance of participants to move from declarations to actual disbursements.

The instability of US trade policy and Donald Trump’s protectionism in 2025 did not help the euro gain ground against the dollar on the global stage. According to a report from the European Central Bank, by the end of the year, the euro’s share in the international monetary system stood at around 20%, which is only slightly higher than previous levels and 4 percentage points below the historical peak observed in the mid-2000s. In global reserves, the euro’s share dropped to 20.2%. Due to geopolitical tensions, central banks and private investors preferred to buy gold. Given the sharp increase in the price of the precious metal, its share in global reserves for the first time has exceeded that of both the euro and US Treasury bonds.

ECB President Christine Lagarde noted that the changing landscape underscores the importance of enhancing the euro’s international role, but European policymakers need to move from words to action. She called for accelerated progress toward a unified capital market to unlock Europe’s potential. An important step in this direction was an agreement reached in early June 2026 by six of the largest EU economies to establish centralized oversight of the financial market.

At the same time, the euro has improved its performance in the debt market. The total volume of loans and bonds issued in euros reached a historic high of over $1.1 trillion, accounting for approximately 30% of the global total. Corporations have been actively borrowing in euros due to low spreads and an investment boom in the artificial intelligence sector. For instance, Alphabet secured approximately $13 billion in euros through two transactions for the first time. Additionally, the volume of euro-denominated green bonds, aimed at sustainable development, has surpassed dollar figures for the first time.