Middle East Conflict Sends Shockwaves Through Global Economy

The OECD has warned that ongoing conflict in the Middle East threatens global economic growth, with energy disruptions likely to drive inflation higher. Previously anticipated GDP growth has been downgraded due to soaring energy prices, despite previous investment momentum and reduced tariff rates in major markets.

The escalating conflict in the Middle East is exerting a significant drag on the global economy, as suggested by recent findings from the OECD. Thursday's report indicates a looming threat of intensified inflation due to disrupted energy shipments through the Strait of Hormuz.

The OECD unveiled that war in Iran has dashed prospects for robust global growth, initially predicted to outpace expectations. Now, global GDP is expected to drop from last year's 3.3% to 2.9% in 2026 before a modest rise to 3.0% in 2027, offset by an energy price surge and ongoing conflict.

According to projections, the disruption in energy markets should moderate, with prices of oil, gas, and fertilizers anticipated to decline from mid-2026. Concurrently, the G20's inflation rate is forecasted to surpass previous predictions by 1.2 percentage points, hitting 4.0% in 2026.

(With inputs from agencies.)