OECD Cuts Global Growth Outlook As U.S.-Iran War Weighs On Economy, Energy Markets

The Organization for Economic Cooperation and Development (OECD) revised its global growth projections downward in its June Economic Outlook, attributing the downgrade to ongoing tensions between the U.S. and Iran. The organization now expects worldwide economic growth to slow to 2.8% in 2026, down from a previous forecast of 3.4%, before recovering to 3.1% in 2027. The conflict has disrupted energy markets, trade routes, and investment activity, with the Strait of Hormuz remaining closed and Gulf energy infrastructure damaged. The OECD’s baseline scenario assumes disruptions ease in the second half of 2026, allowing shipping and energy flows to stabilize. However, Chief Economist Stefano Scarpetta emphasized that the outlook remains highly dependent on Middle East developments. If disruptions persist through 2027, global growth could plummet to 2.1% in 2026 and 1.8% in 2027, pushing some economies into recession. Energy costs have surged due to the conflict, increasing expenses for fertilizers and industrial inputs worldwide. This has pressured businesses and consumers, while inflation is projected to rise by 0.4 percentage points in 2026 and 1.3 percentage points in 2027 under prolonged disruption. Energy-importing nations in Asia, including Japan and South Korea, face the greatest exposure, though supply constraints vary by country. The OECD also highlighted risks to investment and employment, particularly in energy-intensive sectors like artificial intelligence infrastructure and data centers. Despite these challenges, strong AI-related investments by major tech firms continue to support productivity and economic activity in advanced economies. The downgrade aligns with warnings from other institutions, such as the International Monetary Fund, which previously flagged similar economic risks.