The Organisation for Economic Cooperation and Development (OECD) has sharply downgraded its global growth outlook, citing the ongoing U.S.-Iran war and resulting disruptions to energy markets and the Strait of Hormuz as major threats to the world economy [1]. In its June Economic Outlook, the OECD projects global growth to slow from 3.4% in 2025 to 2.8% in 2026, with a potential recovery to 3.1% in 2027 if current energy price shocks ease by mid-year and a peace agreement is reached swiftly [1].
However, the OECD warns that if disruptions to shipping and energy infrastructure persist well into 2027, global growth could plummet to 2.1% in 2026 and 1.8% in 2027, potentially pushing some economies into or near recession [1]. The report highlights that the shutdown of the Strait of Hormuz and damage to Gulf energy infrastructure have caused energy prices to soar, increasing costs for fertilizers and other industrial inputs [1]. These effects are expected to linger even after a resolution to the conflict is found [1].
OECD chief economist Stefano Scarpetta emphasized that a durable settlement would not only bring regional relief but also help resolve the economic disruptions caused by the conflict [1]. He warned that prolonged disruptions would result in higher inflation—up by 0.4 percentage points in 2026 and 1.3 percentage points in 2027—increased unemployment, and weakened investment, particularly in energy-intensive sectors like AI [1]. Scarpetta also noted the risk of financial market repricing due to elevated commodity prices, with the impact being especially severe for developing economies with limited energy reserves and weaker fiscal and social safety nets [1].
The OECD cautioned that the ongoing situation complicates the task for global central banks, which are already facing the dual challenges of weaker growth and persistent inflationary pressures [1].
CONCLUSION
The OECD's latest outlook underscores the significant risks posed by the U.S.-Iran war to global economic growth, inflation, and market stability. Prolonged disruptions to energy markets could deepen economic challenges, particularly for vulnerable developing economies, and complicate central bank policy responses worldwide.