OECD Cuts Global Growth Forecast Due to US-Iran War

The Organisation for Economic Co-operation and Development lowered its 2026 global growth forecast to 2.8%, down from 3.4% in 2025, citing the economic fallout from a war between the United States, its allies, and Iran. The conflict, triggered by February strikes on Iran, has resulted in a three-month chokehold on the Strait of Hormuz and significant damage to energy infrastructure in the Gulf. This has driven up global energy and fertilizer prices, pushing projected global inflation to 4.0% this year.

In its June Economic Outlook, the organization warned that if the conflict persists into 2027, global growth could plummet to 2.1% in 2026 and 1.8% in 2027, potentially triggering the deepest economic slump in 40 years outside of the 2009 financial crisis and the pandemic. Such a scenario would likely push emerging economies into recession. Regional impacts include projected growth of 2.0% for the United States, 0.8% for the eurozone, and a slowdown in China from 5.0% in 2025 to 4.3% by 2027. India is projected to grow 6.3% in FY27, though the OECD anticipates a temporary interest rate hike to anchor inflation.

Diplomatic efforts remain stalled as Iran refuses to negotiate while Israel continues attacks against Hezbollah in Lebanon, despite claims from Donald Trump that a deal is imminent. Similar warnings regarding the disproportionate impact on developing nations were echoed by the European Bank for Reconstruction and Development, the International Monetary Fund, and the United Nations Department of Economic and Social Affairs.