For financial firms and the people who invest in them, 2026 has been an unaccommodating year. The war between America and Iran has pushed up the price of oil and, with it, inflation. Deposit growth in mature markets is slowing, and consumers around the world are spending less freely. Banks are therefore being squeezed from both ends of the income statement just as their operating and funding costs climb.
The deeper problem is one of horizon. Tariffs imposed at short notice, sanctions and sudden outbreaks of fighting have upended long-established trading relationships and forced capital markets to adapt on the hoof. Conditions can shift before a business has had time to revise its forecasts or rework the assumptions behind an acquisition, let alone line up the funding for it.
Geography returns to the risk model
The year has been punctuated by flashpoints: the American attack on Venezuela and the seizure of its sitting president, the continuing conflict with Iran and the disruption in the Strait of Hormuz, and Israel’s campaign in Lebanon. America’s designs on Greenland have added to the turbulence, with each announcement jolting bond yields, cryptocurrencies, gold and oil. Even Dubai, long regarded as a safe berth for capital markets, has come under attack from Iranian drones as Tehran retaliates against countries it considers allies of America.
Geographic risk premia that were once largely theoretical are now being repriced in real time, and the extra return investors demand for exposure to a troubled region feeds into borrowing costs, insurance and asset prices almost at once. For dealmakers, the location of a target’s operations, suppliers and customers may matter as much as its home market.
Persistent inflation complicates matters further. Central banks would like to cut interest rates, but energy shocks and other upside risks to prices leave them little room for maneuver. Growth forecasts have largely been marked down, and in countries such as Britain, mortgage lenders have raised rates as the property market slows.
Less room for error
Dearer energy is raising operating costs and upsetting long-term budgets in energy-intensive industries. Data centers show the problem clearly. Financial firms’ ambitions in AI rest on them, yet their appetite for power leaves them exposed whenever fuel prices jump or supply becomes less dependable. The machines meant to trim banks’ costs are turning out to be rather expensive to keep switched on.
Supply chains remain fragile, too, because many businesses still run just-in-time models with little tolerance for delay. A bottleneck can cost revenue and open gaps between working capital, inventory and operations that end in payment problems. The strain has created demand for working-capital platforms, which help firms manage short-term cash, invoices and payments.
Such fixes do little for the longer-term threats. Alongside geopolitical risk, Celent ranks cybersecurity, structural regulatory change and technological disruption as the main macro concerns for treasury and capital-markets teams. Coping with them requires a clear view of suppliers and other third parties, to see where disruption might spread, and recovery plans that restore critical services faster than rivals can, limiting the financial and reputational damage when something goes wrong.
America, China and Europe part ways
The big three economies are suffering in different ways. In America, consumer-price inflation reached 4.2% year on year in May 2026, its highest in three years, with energy accounting for roughly 60% of the monthly increase. It eased to 3.4% over the summer but climbed back to 3.7% in September. The Federal Reserve has changed course. In September it raised its policy rate by a quarter-point, to 3.75–4%, its first increase since July 2023, and 16 of its 18 officials expect at least one more before the end of the year. GlobalData forecasts real GDP growth of 2.3% for 2026.
China looks calmer, at least on the surface. Consumer prices rose by just 0.9% in the year to September, while producer-price inflation accelerated to 5%, from 3.8% in August. Benchmark one-year and five-year loan prime rates were held at 3.0% and 3.5% again in October, with the People’s Bank of China preferring targeted intervention to broad cuts. GDP grew by 4.5% year on year in the third quarter and by 4.6% in the first nine months, inside the government’s target range of 4.5–5%. GlobalData’s forecast of 4.5% for the full year matches the pace so far.
The eurozone has drawn the least comfortable hand: weak growth and the fastest inflation of the three. Annual inflation rose to 3.8% in September, from 3.2% in August. GDP was flat in the first quarter and grew by 0.6% in the second, though that figure leans heavily on a 10.2% jump in Ireland’s famously erratic output. The European Central Bank raised its three key rates by 25 basis points in June, its first increase since 2023, paused in July and raised them again in September, taking the deposit rate to 2.5%. Most economists expect it to hold on October 29th and move again in December. A eurozone hiking cycle featured in few 2026 base cases. European deal models should therefore test what happens if borrowing costs keep rising while activity stays subdued.
Pricing the uncertainty
Currency movements add a further twist for cross-border buyers. By late October the yuan had risen by nearly 5% against the dollar since the start of the year, reaching its strongest level since 2022, while the euro had fallen by more than 5%. The divergence has flattered the dollar price of European targets and made Chinese assets dearer, though exchange rates can reverse long before a deal closes.
Dealmakers must now test how a transaction would fare under several sets of conditions. Financing costs, energy prices, exchange rates, supply disruption and geographic exposure can each alter a target’s cash flow or valuation. The same pressures also point to opportunities. Demand for cybersecurity and regulatory technology is close to compulsory, so customers keep paying when growth slows, and working-capital services stand to gain from the strain on corporate cash.
Short-term shocks may go on obscuring the long-term direction of the market. Financial institutions that understand their exposure and can recover quickly from disruption will be better placed to protect earnings, and to move when attractive assets come up for sale. For investors, resilience has become part of the valuation case.
Discover further insights
To learn more, download The future of financial services: insights for investors & M&A dealmakers, published in association with Sterling Technology – the provider of premium virtual data room solutions for secure sharing of content and collaboration for the investment banking, private equity, corporate development, capital markets and legal communities engaged in financials M&A dealmaking and capital raising.
