Estonian Economy and Monetary Policy 1/2026
Increased geopolitical tensions and war in the Middle East have again impacted the global economy and made the outlook for it less certain. The global economy was on a track of growth at the end of last year and the start of this, with support from lower inflation and interest rates, more stable trading relations, expansive fiscal policies, and investment in new technology, but the outbreak of war in Iran and the wider region on 28 February have again upended the conditions for global growth. The immediate impact of the war has been on financial and commodities markets as prices have jumped for fuels, financial markets have become more volatile, and bond yields have spiked. Rises in volatility indexes for stock markets and measures of geopolitical uncertainty show that investors have become more cautious and risk premiums have increased. Indexes measuring disruptions to supply chains have also risen, adding to the increasing tensions in global trade.
