OECD warns of global slowdown - "US-Iran war hampers economic growth prospects"
The Organization for Economic Co-operation and Development (OECD) has downgraded its global growth outlook, warning that the economic damage from the US-Iran war could worsen dramatically unless a lasting peace deal is reached quickly.
In its June Economic Outlook, the OECD said global growth is expected to slow from 3.4% in 2025 to 2.8% in 2026, before recovering to 3.1% in 2027 - if the current energy price shock starts to ease by the middle of this year.
But this is assuming a time-limited disruption scenario, in which a peace agreement is reached and the current disruptions in the Strait of Hormuz are resolved quickly.
A worst-case scenario, in which disruptions to shipping and energy infrastructure continue through 2027, would see global growth fall significantly to just 2.1% in 2026 and 1.8% in 2027. This would push some economies into recession, or close to it.
The OECD study examines how the closure of the Strait of Hormuz, along with damage to energy infrastructure across the Gulf, has raised energy prices, the costs of fertilizers and other key industrial inputs. The study noted how the fallout from the Iran war could be felt for some time, even after a resolution is found.
According to the OECD, a sustainable solution to the current conflict would not only bring relief to the region, but would "lay the foundations for a solution to the problems it has caused in the global economy."
In the worst-case scenario, global inflation is expected to rise by 0.4 percentage points in 2026 and 1.3 percentage points in 2027. “Unemployment would rise and investment – including in energy-intensive artificial intelligence – would weaken significantly, with increasing risks of financial market repricing... with upward pressures from higher commodity prices partly offset by weaker final demand,” the OECD said.
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