Six Global Issues to Watch in July 2026

War and Peace in the Middle East

The peace deal signed last month by the United States and Iran has done little to reduce the level of uncertainty in the Middle East. What is certain is that most of the world is desperate for this conflict to be over for good. United States President Donald Trump is desperate to withdraw his country from a highly unpopular conflict. The global economy is also desperate for clarity, as this conflict has caused the largest disruptions to global trade and supply chains since the Covid-19 pandemic. Iran too, despite its bluster, is desperate for a period of peace given the damage caused to its infrastructure and armed forces.

For the United States, this conflict may have been a military victory, but it was a major strategic loss. Not only has it unsettled its allies in the region, but it has allowed a much weaker power to gain strategic advantages in the region. Meanwhile, Israel may have been the conflict’s biggest loser, as it has seen the US reach a deal with Iran without its participation, while it risks losing its most important ally. What is certain is that the Middle East will produce more uncertainty in the weeks ahead.

 

Is AI Keeping the Entire Global Economy Afloat?

Overall, global economic growth rates look relatively healthy, even with the disruptions caused by the conflict in the Middle East, changes in trade policy, and other factors. In the United States, growth is slower than in previous years, but still well above that of most other developed economies. In Asia, manufacturing exports continue to drive solid growth in that region. Overall, global economy growth will remain not too far below previous levels this year.

One factor more than any other is preventing the global economy from falling into a deeper slowdown, artificial intelligence. First, the massive amount of investment flowing into the expansion of artificial intelligence has been a major driver of growth for many economies. Second, we are starting to see some of the first signs of higher productivity growth rates thanks to the increasing use of AI. This could result in a small number of AI-rich economies pulling ahead of those economies that are trailing in the development and the use of this technology.

 

Latin America Moves to the Right

Latin America’s two largest economies, Brazil and Mexico, have left-wing governments, with Lula Da Silva leading Brazil and Claudia Sheinbaum in charge in Mexico. However, the next eight largest economies in Latin America all will soon have governments that are well to the right-of-center. This follows narrow victories by right-wing candidates in the recent presidential elections in Peru and Colombia.

The right-wing is in ascendance in Latin America for many reasons. For example, there is a strong desire by many Latin American voters to have their governments crack down on the gangs and drug cartels that plague the region. At the same time, anti-immigration sentiment has been on the rise in many parts of the region. Finally, economic growth across much of Latin America has been relatively weak in recent years, while inflation has been stubbornly high. These trends will no doubt play a major role in Brazil’s upcoming presidential election later this year, which appears likely to be another close-run affair.

 

El Niño is Here

The latest El Niño has begun and meteorologists have warned that this could be the most powerful El Niño in the past 75 years. What is certain is that it will have a major impact on weather patterns around the world, and this could lead to severe humanitarian crises as well as disruptions to the global economy.

Some regions such as western South America, the southern United States and East Africa could see major rainfalls that produce widespread flooding and landslides. In other regions, severe droughts are more likely. This includes Southeast Asia, southern Africa and the Amazon Basin. In either case, agricultural output is likely to be disrupted, pushing food prices much higher and potentially leading to major food shortages in some parts of the world.

 

US Trade Policy

Over the past 18 months, one of the biggest issues facing the global economy has been the uneven trade policy of the Trump Administration in the United States, and this is expected to continue to cause uncertainty in the weeks and months ahead. For example, the USMCA trade deal in North America is in jeopardy as President Donald Trump has refused to extend this deal before its July 2026 review deadline. At the same time, the Trump Administration has threatened to impose 100% tariffs on any country that imposes a tax on digital services, a sector of the economy led by the United States.

After 18 months of tariffs and uncertainty, it remains unclear whether or not the Trump Administration has met any of its goals for its widespread use of tariffs. On one hand, the United States’ manufacturing sector has shown some signs of growth in recent months, even if this is largely-jobless growth. On the other hand, this trade policy has done little to reduce the US’ trade deficit, or to raise significant revenues for the federal government. What is certain is that this uneven trade policy will remain a challenge for businesses making strategic investment decisions, as well as for supply chains, over the remained of this year.

 

Everyone is Investing in Drones

The biggest development in warfare in recent years has been how drones have transformed the battlefield. The most notable example of this is in Ukraine, where a much smaller country has used drones to not only blunt the invasion of its much-larger neighbor, but to also strike deep into the heart of Russia. Recently, Iran was able to use drones to close the Strait of Hormuz, despite the presence of overwhelming United States military forces in that region.

This has led to a race to develop drone technology and to introduce the mass production of drones for military purposes. One example of this is in South Korea, where that country recently announced that 500,000 military personnel would be trained to use drones for combat purposes. As drones proliferate, many weapons systems could become obsolete, as we have seen in Ukraine, where tanks have been forced from many areas of the battlefield by drones. More ominously, autonomous drones are being developed by many countries which will not need humans to make decisions on attacking targets, something that could bring an even bigger change to how wars are fought in the future.