OECD Cuts Global Growth Outlook As U.S.-Iran War Weighs On Economy, Energy Markets
The global economy is expected to slow this year as the fallout from the U.S.-Iran war continues to ripple through energy markets, trade routes and investment activity.
The Organization for Economic Cooperation and Development (OECD) lowered its global growth forecast in its June Economic Outlook released Wednesday, saying worldwide economic growth is now projected to ease from 3.4% in 2025 to 2.8% in 2026 before improving to 3.1% in 2027.
The updated projections reflect the impact of months of the war in Iran, including the blockade of shipping through the Strait of Hormuz and damage to energy infrastructure across the Gulf, according to the OECD report and comments from Chief Economist Stefano Scarpetta.
The Paris-based organization said its baseline forecast assumes that disruptions to energy markets begin easing during the second half of 2026 and shipping constraints in the Strait of Hormuz are resolved. Scarpetta told CNBC that the outlook remains closely tied to developments in the Middle East and the restoration of normal energy flows.
The OECD also outlined a more severe disruption scenario in which shipping and energy infrastructure disruptions continue through 2027. Under that assessment, global growth would slow to 2.1% in 2026 and 1.8% in 2027, with some economies moving into or near recession, CNBC reported.
The warning comes as the Strait of Hormuz remains closed. The OECD said disruptions linked to the conflict have increased the cost of energy, fertilizers and other industrial inputs, creating additional pressure on businesses and consumers worldwide.
Inflation also remains a concern. The OECD said global inflation would rise by 0.4 percentage points in 2026 and by 1.3 percentage points in 2027 under a prolonged-disruption scenario. Higher commodity prices, particularly for energy, would contribute to rising costs across multiple sectors, while weaker demand would partially offset some of those pressures.
Scarpetta added that the impact varies significantly among countries. Energy-importing economies in Asia have been among the most exposed to supply disruptions. While countries such as Japan and South Korea have substantial strategic reserves, other nations have faced tighter supply conditions and higher import costs, CNBC reported.
The OECD said prolonged energy disruptions would also weaken investment activity and increase unemployment. The report highlighted concerns about reduced spending in energy-intensive industries, including artificial intelligence infrastructure and data centers, which require substantial power supplies.
Despite the broader slowdown, the OECD identified continued investment in artificial intelligence as a source of economic support. According to the report, strong AI-related investment from major technology companies is contributing to productivity gains and supporting economic activity in several advanced economies.
The latest downgrade follows similar warnings issued by other international institutions. In its April World Economic Outlook, the International Monetary Fund (IMF) said the Middle East conflict had become a major risk to global growth, citing rising energy prices, tighter financial conditions and renewed inflation pressures. The IMF projected global growth of 3.1% in 2026 under its baseline scenario while warning that extended disruptions could significantly weaken economic activity.
The United Nations Department of Economic and Social Affairs (UN DESA) also warned in a mid-year update that developing economies are facing disproportionate challenges from higher energy costs, weaker trade flows and tighter financial conditions linked to the conflict. The agency said many lower-income countries have limited fiscal resources and remain particularly vulnerable to commodity price shocks.
The OECD said the crisis has underscored the vulnerability of the global economy to disruptions at major energy chokepoints and highlighted the importance of strengthening supply chain resilience and diversifying energy sources. The organization added that governments have relied on strategic energy reserves and international coordination efforts to ease some of the pressure created by supply shortages.
