Global growth is set to ease from 3.3% last year to 2.9% in 2026 owing to the Iran War, which also involves the United States and Israel.

However, the latest projection from the Organisation for Economic Co-operation and Development (OECD) projects growth edging up to 3.0% in 2027, as an energy price surge and the unpredictable nature of the conflict offset tailwinds from strong technology-related investment, lower effective tariff rates and momentum carried over from 2025.

The projections in the OECD’s interim Economic Outlook are conditional on a technical assumption that energy market disruption moderates over time with oil, gas and fertiliser prices declining gradually from mid-2026 onwards. 

The 2026 projection is unchanged from the OECD’s December 2025 forecast, but preliminary indications since then had suggested global GDP growth could have been upwardly revised by around 0.3% in 2026 had the conflict not escalated, a revision that has been entirely erased by the impact of the fighting.

With energy prices now soaring, G20 inflation is projected to be 1.2 percentage points higher than previously expected in 2026 at 4.0%, before easing to 2.7% in 2027. 

However, a prolonged disruption to shipments through the Strait of Hormuz or sustained closures of oil and gas facilities could lead to significantly worse outcomes. 

In an adverse scenario where energy prices peak higher and stay elevated longer, global growth would be 0.5 percentage points lower by the second year of the shock, and inflation would be 0.9 percentage points higher

OECD chief Mathias Cormann notes, “there’s a high level of uncertainty around the duration and the magnitude of the current conflict in the Middle East and that means that this outlook is subject to significant downside risks that could result in lower growth and higher inflation.”