Rabobank strategists assess how the US and Israel’s war with Iran may affect China. They note higher oil and gas prices and global cost-related inflation, but say inflation in China is unlikely to force the PBOC to tighten monetary policy. However, Rabobank lowers China’s gross domestic product (GDP) forecast for 2026 to 4.5%, with higher inflation and unemployment expected.
The shocks of war and China’s resilience
“Oil and gas prices have skyrocketed and remain extremely volatile since the beginning of the United States and Israel’s war on Iran, leading to the risk of rising inflation around the world.”
“China was well prepared for oil supply disruptions and could partially offset the loss of Middle Eastern oil imports with its vast reserves and supplier diversification.”
“While much remains uncertain at this point, we conclude that for now it seems unlikely that inflation in China will rise to levels that would compel the PBOC to act.”
“However, China’s economy will be impacted by lower exports to the rest of the world due to global inflation driving up costs and lower domestic consumption.”
“We lower our 2026 GDP forecast to 4.5% and see higher inflation and higher unemployment, with inflation at 0.7% and unemployment at 5.4% in 2026.”
(This article was created with the lend a hand of an artificial intelligence tool and has been reviewed by an editor.)
