Rising inflation and a sharp increase in oil prices are weighing on global economic growth as G7 leaders gather in France. The slowdown follows months of conflict involving the United States, Israel, and Iran, which disrupted energy markets worldwide. Governments, businesses, and consumers are facing higher costs despite a recent agreement aimed at restoring stability.
Although several leaders have criticized US President Donald Trump’s handling of the conflict, they are expected to avoid direct confrontation during the summit. Instead, discussions are focusing on economic cooperation, supply chains, and development initiatives. Analysts say leaders are reluctant to challenge Washington openly because they need US support on trade, security, NATO, and Ukraine.
The economic impact of the conflict has already become evident. Oil prices surged by roughly 30%, increasing inflationary pressures and raising concerns about food security in developing nations. In response, major central banks, including the European Central Bank and the Bank of Japan, recently raised interest rates to contain inflation risks.
Meanwhile, the United States and Iran have reached a framework agreement to end hostilities and reopen the Strait of Hormuz. The deal has improved market sentiment and pushed oil prices lower from recent highs. However, economists warn that energy and shipping markets may take months to fully recover if normal trade flows are restored.
Questions about the G7’s relevance have also resurfaced as emerging economies gain greater influence in the global economy. While the group still represents a significant share of global output, its economic dominance has declined over time. Nevertheless, experts argue the G7 remains an important platform for coordinating responses during periods of global economic uncertainty.