Geopolitical Risk Brief: September 2026

Our country risk experts provide insight into key geopolitical events that could impact the economic environment in September.

1. A prolonged Middle East conflict and persistent energy disruption

The US-Israel war with Iran remains a pivotal influence on the US outlook. The economic shock has been smaller initially than expected, but it is proving more persistent.

Disruption to oil infrastructure and shipping routes is increasing supply concerns. The spot price of Brent crude climbed back above US$100 per barrel.

2. A sustained sabotage threat to European infrastructure and industry

The likelihood of sabotage attempts in Europe will remain high in the one-year outlook, with frequent incidents and a high risk of repair and mitigation costs for governments and businesses.

Russia-directed sabotage operations remain low in cost, mixing the recruitment of low-skilled civilians for simple operations and the deployment of intelligence operatives for more complex sabotage operations. Critical national infrastructure remains a key target, including railways, airports, energy and telecoms assets, as seen in previous incidents in Europe, including in Poland and Germany.

The recent targeting of unmanned aerial vehicle manufacturers also underscores the growing risks faced by the defense sector. European NATO member states and companies operating there will continue to face high damage costs and financial losses while the Russia-Ukraine war lasts.

Countries on NATO’s eastern flank and European NATO member states holding elections are at the highest risk of sabotage attempts, both kinetic and cyber.

3. Intensifying resource competition around AI and data centers

Governments continue to view AI-related investment as a strategic economic priority, but the global development of data centers is becoming a competition for power, water, infrastructure, labor and regulatory capacity.

Constraints vary by region:

• Americas: The world’s largest data center investment market faces growing community, regulatory and political scrutiny.
• Europe: Supportive policies and private investment are running into power, grid and local planning constraints.
• Asia-Pacific: Strong government support is being accompanied by pauses in approvals, restrictions and tighter conditions as competition for power, water and skilled labor intensifies.
• Middle East: Gulf economies are advancing ambitious expansion plans but remain constrained by shortages of specialized talent and dependence on imported chips.
• Africa: Infrastructure bottlenecks continue to limit development prospects in many markets.

Several previously separate pressures are beginning to reinforce one another.

Conflict is creating a broader and more persistent energy shock

The initial effect of the Middle East conflict was milder than forecast, but oil prices are remaining higher for longer. Earlier projections anticipated Brent crude averaging US$112 per barrel in the second quarter before falling to US$73 by the fourth quarter. Instead, Brent averaged US$97 in the second quarter and is expected to remain close to US$90 through year-end.

More recent disruption has pushed Brent back above US$100 per barrel, suggesting that the conflict’s economic effects may continue through a series of supply interruptions rather than a single acute shock.

Energy, infrastructure and technology risks are becoming interconnected

Energy supply is central to several of the month’s major risks. Conflict is affecting oil and gas prices, sabotage is targeting electricity infrastructure, and data center expansion is placing additional pressure on power generation and transmission networks.

This means businesses may face several forms of energy exposure simultaneously: higher prices, reduced reliability, infrastructure damage and increased competition for capacity.

Financial markets are reacting to the duration of the shock

Higher energy prices have not yet produced a substantial rise in core inflation, but markets are preparing for that possibility. Futures markets are pricing in at least two additional 25-basis-point increases by the US Federal Reserve and three similar increases by the European Central Bank by spring 2027.

If energy costs remain elevated, central banks could maintain tighter policy for longer. Rising bond yields are already increasing financing costs, even before the full inflationary consequences become clear.

Governments are facing competing strategic and fiscal demands

Governments are attempting to support AI investment, protect critical infrastructure, respond to conflict-related disruption and manage weaker public finances at the same time.

These priorities compete for funding, electricity, infrastructure, regulatory capacity and specialized workers. The result is a growing risk that governments will have to slow, condition or reprioritize strategic investment.

The global economy entered the shock with positive momentum

Global growth indicators were strengthening before the latest rise in energy prices and bond yields. S&P Global Purchasing Managers’ Index data for August showed a fifth consecutive increase in the global composite output index and the fastest rate of global growth since mid-2024.

This creates a mixed outlook. Economic momentum is relatively resilient, but it is now being tested by more expensive energy and tighter financial conditions.

Disruption to crude oil flows and rising prices. Heightened supply concerns have pushed the spot Brent crude price back above US$100/barrel. Although still below April’s high, the average price over the first half of September is more than 40% above early July’s low.

Broadening energy price pressures. This includes prices of refined products, with US diesel prices recently rising above US$6 per gallon for the first time. Gas prices in Europe have also come under upward pressure due to concerns about low storage levels.

Pass-through to core inflation. The larger and more persistent the energy shock, the higher the likelihood of an extended period of policy tightening.

Rising sovereign bond yields. The 10-year US Treasury yield has risen by over 100 basis points compared with its prewar level, with increases in two of Europe’s most fiscally challenged economies, the UK and France, even bigger still. Acknowledgment by governments of the need to tackle the weak state of their public finances would help, but that is likely to require much more market pressure.

The impact of recent developments on global economic conditions. The growth signals from S&P Global’s Purchasing Managers’ IndexTM (PMI®) data were again positive in August. After a fifth straight rise, the global composite output index indicated the highest rate of global growth since mid-2024. However, energy prices have risen sharply since then, and financial conditions have tightened.