Markets have been broadly orderly so far—but financial stability risks are elevated
The Middle East conflict halted growth momentum. The right policies and stronger global cooperation are needed to contain the damage.
Rising defense spending requires difficult fiscal choices to avoid raising vulnerabilities, while post-war recovery hinges on policies to reduce uncertainty, rebuild capital, and help displaced people return home
Nonbank financial investors expand funding access for emerging markets, but their flows are highly sensitive to shifts in global risk sentiment
Widening global current account imbalances are best addressed by simultaneous domestic policy adjustments. Industrial policy and tariffs offer a costly fix with unreliable effects on imbalances.
Energy prices, supply chains, and financial markets are the main transmission channels, but the regional effects will vary significantly
