The Organisation for Economic Co-operation and Development (OECD) has cut its projection for world growth and cautioned that the economic fallout from the U.S.-Iran war could worsen unless a rapid and lasting peace is reached.
In its June Economic Outlook, the OECD reduced its forecast for global growth to 2.8% for this year, down from 3.4% in 2025, and put a partial rebound of 3.1% on the table for 2027. That baseline assumes that energy price pressures will begin to ease around mid-year and rests on the expectation that a peace agreement will materialize soon and that disruptions to the Strait of Hormuz will be resolved quickly, OECD chief economist Stefano Scarpetta said.
The agency also set out a darker path in which shipping and energy supply disruptions continue deep into 2027. Under that scenario, world growth could fall to just 2.1% this year and decline further to 1.8% in 2027 - an outcome that, Scarpetta warned, would push some economies into recession or very close to it.
How the conflict is filtering through the global economy
The report details how closure of the Strait of Hormuz combined with damage to energy infrastructure across the Gulf has driven energy prices higher and raised costs for fertilizers and other important industrial inputs. The OECD said these cost increases have broad implications for production and prices, and that even after any military or diplomatic resolution, the economic consequences of the conflict are likely to linger.
Scarpetta stressed the potential benefits of a durable settlement, saying it would not only provide relief to the region but also "lay the groundwork for a resolution to the disruptions it has caused to the global economy," and warned that "the longer the disruptions last, the larger the economic and social costs become."
Inflation, employment and investment under stress
In the OECD's worst-case scenario, global inflation would increase by 0.4 percentage points in 2026 and by 1.3 percentage points in 2027. Scarpetta highlighted additional effects on labour markets and investment, noting that "Unemployment would rise and investment - including in energy-intensive AI - would weaken significantly, with increasing risks of financial market repricing… with upside pressures from elevated commodity prices partially offset by weaker final demand."
The organisation called particular attention to developing economies, which it said could face especially severe consequences. Those countries commonly have limited energy reserves, higher shares of energy and food in household consumption, constrained fiscal capacity and weak social safety nets, low private savings buffers and more fragile currencies, making them more vulnerable to prolonged disruptions.
Bottom line
The OECD's revision signals a marked slowing in world growth under its central forecast and outlines a substantially worse outcome if energy and shipping routes remain disrupted. The outlook underscores the contingent nature of the recovery and the dependence of the global economy on a quick resolution that eases energy-price pressures.
Summary
The OECD has lowered its global growth forecasts and warned that prolonged disruptions tied to the U.S.-Iran war and damage to Gulf energy infrastructure could deepen the slowdown, push inflation and unemployment higher, and damp investment, especially in energy-intensive sectors.