Midyear Themes: Geopolitics Has Replaced Monetary Policy as the World's Biggest Economic Driver

Northern Trust argues that 2026 has become a year defined by geopolitical shocks, forcing central banks, governments and investors to rethink assumptions about inflation, trade and globalisation.

• The report estimates the war in Iran has imposed more than $1 trillion in global economic costs, while supply chain disruptions, higher energy prices and elevated uncertainty continue to weigh on investment and growth.
• Central banks have largely abandoned expectations of rate cuts, instead prioritising inflation credibility as persistent energy shocks keep price pressures elevated across major economies.
• Beyond macroeconomics, Northern Trust highlights broader structural shifts including the return of transactional trade policy, renewed U.S. hemispheric strategy and growing questions about whether AI's extraordinary growth trajectory can continue indefinitely.

Read the full commentary for Northern Trust's review of the defining economic and geopolitical themes shaping 2026.