Quick overview

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The Organisation for Economic Co-operation and Development warned that the war in the Middle East—particularly the conflict involving Iran and the disruption of shipping through the Strait of Hormuz—has derailed expectations for a stronger global economic expansion.

The OECD said Thursday that the conflict has sharply curtailed global growth prospects, with the halt in fuel trade through the Strait of Hormuz threatening to push inflation higher worldwide.

According to the Paris-based organization, the global economy had been on track for a more robust expansion prior to the outbreak of hostilities in Iran—a scenario that has now largely faded. Global GDP growth is projected at 2.9% in 2026, down from 3.3% the previous year, before edging up to 3% in 2027.

The surge in energy prices and the unpredictability of the conflict have offset tailwinds from strong technology-related investment, easing U.S. tariffs under Donald Trump, and momentum carried over from 2025.

The Strait of Hormuz—through which roughly one-fifth of global hydrocarbons previously flowed—has been largely paralyzed since the start of hostilities on February 28, when the United States and Israel launched strikes on Iran, prompting Tehran to restrict access to the strategic route.

“There is a high level of uncertainty regarding the duration and scale of the current Middle East conflict, meaning these projections are subject to significant downside risks that could result in lower growth and higher inflation,” said Mathias Cormann.

Uneven impact

The OECD’s baseline scenario assumes that current energy market disruptions will gradually ease, with oil, gas, and fertilizer prices declining from mid-2026 onward.

However, both the scale and duration of the conflict remain highly uncertain. In that context, Christine Lagarde said this week that the European Central Bank stands ready to raise interest rates again if inflation resurges due to the war.

Eurozone GDP growth is projected to slow to 0.8% in 2026 as higher energy prices weigh on activity, before recovering to 1.2% in 2027. This represents a significant downgrade from December forecasts of 1.2% and 1.4%, respectively.

In China, growth is expected to ease to 4.4% in 2026 and 4.3% in 2027, broadly in line with previous estimates. Meanwhile, in the United States, growth is projected to slow from 2% in 2026 to 1.7% in 2027. The OECD had previously forecast 1.7% for this year and 1.9% for 2027, before the Supreme Court ruling on Trump-era tariffs.