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The global economy is proving remarkably resilient to the Iran war, despite energy market disruptions and renewed hiking cycles from major central banks. As today’s chart shows, our proprietary real activity index for developed markets (DMs) points to a material strengthening in cyclical conditions since March, even as consumer confidence remains weak and higher prices erode household purchasing power. A key driver is the AI buildout, which is sustaining investment in data centres and supporting infrastructure, helping to offset softer consumer demand. Why this matters: Solid Q2 growth figures across developed markets and signs of continued momentum have prompted us to raise our DM growth forecasts slightly, to 1.9% in 2026 and 2.0% in 2027. This also complicates the path forward for central banks, as resilient activity limits the case for rapid rate cuts, while persistent inflation risks could keep interest rates higher for longer.