Extended Middle East War Could Drag Global Economy Lower, OECD Says

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Paris: The Organization for Economic Co-operation and Development (OECD) has cautioned that if the ongoing conflict in the Middle East persists until 2027, the world economy may experience  significantly more severe downturn. This would increase oil costs, fuel inflation, and intensify the chance of a global recession.

According to the OECD's most recent forecast, a prolonged conflict might cause global economic growth to drop to 2.1% in 2026 and just 1.8% in 2027, levels similar to those observed during significant economic crises. Key risks include disruptions to trade routes and energy supplies, especially through the Strait of Hormuz.

According to the analysis, rising oil and petrol costs would probably result in increased monetary inflation, which would force central banks to keep higher interest rates for longer. Developing nations with limited energy reserves would be more vulnerable, and Asian economies that rely significantly on Middle Eastern oil supplies may be among the most impacted.

A rapid resolution of the conflict, according to the OECD, would relieve pressure on energy markets and encourage a recovery in global GDP. It continued to emphasise that ongoing geopolitical volatility is a serious danger to economic prospects and might reduce trade, investment, and household incomes in many regions.