North America largely shielded as Hormuz shock reshapes global outlook

The US and Canada are weathering the global economic disruption sparked by the Middle East conflict far better than most other regions, according to a new assessment from S&P Global Ratings.

As net energy exporters, both countries have largely sidestepped the worst effects of the closure-driven shock to the Strait of Hormuz that has rattled economies elsewhere, the ratings agency said in its Q3 2026 global economic outlook.

The firm has kept its 2026 GDP growth forecast for the US broadly steady at 2.1%, and it has trimmed the probability of a US recession to between 20% and 25%. The agency expects the labor market to keep strengthening modestly, with the unemployment rate staying roughly flat in the near term.

Headline consumer price index inflation in the US, currently running at 4.2%, is thought to be close to its peak.

The continued buildout of artificial intelligence infrastructure remains a meaningful growth driver for the US economy, although S&P Global Ratings expects that contribution to taper off going forward.

The agency estimates that AI-related investment, broadly defined, accounted for roughly half of US private-sector spending growth in 2025, a trend it says is carrying into 2026 based on rising hyperscaler capital expenditure and debt issuance.

Canada's picture is more mixed. The economy stalled during the first quarter, though S&P Global Ratings expects a rebound in the second. Beyond that near-term recovery, the agency anticipates the Canadian economy will run below capacity for an extended stretch, with annual growth projected at around 1.1% for 2026 before climbing toward 2.0% in 2027.

On monetary policy, S&P Global Ratings expects the Federal Reserve to maintain a hawkish hold through the remainder of 2026, even as the likelihood of a further rate increase has ticked up. A resumption of rate cuts toward a neutral setting is expected to begin next year. The Bank of Canada, meanwhile, is forecast to hold its policy rate steady for the rest of this year.

The relatively resilient North American outlook stands in contrast to conditions across much of Europe and other energy-importing regions, where S&P Global Ratings has raised inflation forecasts and cut growth projections in response to the supply shock triggered by the conflict.

Globally, the agency described the current economic environment as a tug of war between the disruption stemming from the Hormuz closure and the offsetting boost from AI-related investment.

A memorandum of understanding signed between the US and Iran has introduced upside risk to the broader forecast, though S&P Global Ratings cautioned that shipping and energy flows through the strait will likely remain below prewar levels through the end of 2026 even if tensions ease.