At the onset of 2026, concerns around a potential government shutdown and the lingering effects of tariffs had largely begun to fade, offering business leaders a more predictable backdrop for planning and investment. That relative sense of stability, however, has been disrupted by escalating conflict in the Middle East, which has driven up global energy prices and reintroduced a layer of uncertainty into the economic outlook.
“Priorities haven’t materially shifted since earlier in the year, but business owners are wary because prices have gone up,” said Terry Begley, head of Corporate Banking at PNC. “We still feel like this is an active market, but there’s a bit of caution right now as the geopolitical environment gets sorted out.”
Energy the primary factor
With tariff pressures easing and the Federal Reserve signaling a more measured approach to interest rates, the focus has turned decisively toward energy markets. Rising oil and fuel costs, spurred by the Middle East conflict, are emerging as the most immediate risk factors for businesses.
Begley described the shift as a transition from policy-driven uncertainty to geopolitically driven instability. While tariffs and rate policy may feel more predictable to business owners, energy shocks can be immediate and far-reaching, affecting everything from transportation and manufacturing costs to consumer pricing.
For businesses, the concern lies primarily in how those increases cascade through the economy. Elevated fuel costs impact manufacturing and logistics costs, while also influencing consumer behavior. How households adjust spending to account for higher gasoline and utility bills will determine potential follow-on effects across retail, hospitality and other consumer-facing industries.
Resolution to the conflict could ease those concerns in the short term as the broader economic backdrop remains relatively steady.
Stability beneath the surface
Outside of the geopolitical disruption, many core economic indicators continue to point to resilience. Mike Willets, head of Commercial Banking at PNC, said that manufacturing activity remains strong, supported by steady demand and ongoing investment in domestic production.
Willets emphasized that periods of unpredictability are not necessarily a negative. In fact, they can create openings for well-positioned companies to gain market share or pursue growth initiatives.
“Sometimes turbulence creates an advantage,” he said. “And it’s a reinforcement of our guidance to stay focused on long-term fundamentals rather than short-term noise.”
For many businesses, that means balancing caution with opportunity and continuing to invest in areas that drive competitiveness, even amid external uncertainty.
AI as an advantage
One of the most significant of those investments continues to be artificial intelligence (AI). Across industries, companies are accelerating their adoption of AI-driven tools to help improve productivity, enhance decision-making and streamline operations.
This evolution is already influencing how organizations think about labor, staffing and talent development. Rather than simply replacing roles, many leaders are exploring how AI can limit repetitive tasks and enable employees to focus on higher-value work. Begley noted that this pattern mirrors the introduction of past technological advancements, which ultimately reshaped rather than reduced the workforce.
“AI is likely to change how work gets done, but not eliminate the need for people,” he said. “Over time, we expect it to be a net positive in terms of productivity and growth.”
Continued M&A activity
Despite uncertainty around the duration of the current geopolitical conflict and its future effects on the economy, the impacts to mergers and acquisitions should be limited. Several structural factors are driving this trend, including a large cohort of business owners nearing retirement and looking to transition ownership.
While short-term disruptions can delay or complicate transactions, the underlying drivers of M&A activity remain firmly in place.
Bank market is open
From a financing perspective, the current environment is still broadly supportive. Banks remain active lenders, and interest rates are relatively stable. Begley highlighted that this stability may present a window of opportunity for businesses that are considering borrowing, whether for expansion, acquisitions or operational investments.
“The world economy is strong right now and banks are willing to lend,” he said. “It’s something that clients need to keep in mind because you never know where that may go. It can be advantageous to get ahead of turbulence in the markets.”
While uncertainty has returned to the forefront, it has not fundamentally altered the availability of opportunity. Instead, it reinforces the importance of disciplined planning, strategic investment and readiness to act.
