The war in the Middle East has dented economic growth prospects worldwide, with a more severe shock likely if no effective ceasefire is agreed before 2027, the OECD warned on Wednesday.
Global economic growth is now forecast to slip to 2.8 per cent for 2026 if Gulf oil and gas exports return to pre-conflict levels in the third quarter, the group of 38 industrialised countries said in its quarterly update.
Previously the OECD had forecast full-year global growth of 2.9 per cent.
“But if the Mideast war continues into next year, global growth could slow to 2.1 per cent, well below the average annual growth of 3.4 per cent seen from 2013 to 2019, before the Covid pandemic,” the OECD stated.
“The longer the disruptions last, the larger the economic and social costs become,” the group’s chief economist Stefano Scarpetta said in the report.
He noted that many countries would risk falling into recession, and a drop in investment spending, including in energy-intensive AI, would likely push up unemployment.
Sustained high prices for energy, as well as for fertiliser and other key products from hydrocarbon production in the Gulf, would weigh especially hard on developing countries that have higher shares of energy and food in household consumption.
Even if the war sparked by US and Israeli strikes on Iran in late February ends in the coming weeks, the OECD forecasts global inflation rising to 4.0 per cent this year from 3.4 per cent in 2025.
In this time-limited disruption scenario, the group expects US growth to slow to 2.0 per cent in 2026 and 1.8 per cent in 2027, after growing 2.1 per cent in 2025.
In the eurozone, where many countries are highly dependent on energy imports, GDP growth will slump to 0.8 per cent in 2026 after 1.4 per cent in 2025, assuming a Mideast ceasefire is secured in the coming weeks.
