OECD Forecasts Two Scenarios for Global Economy Amid Middle East Conflict
The OECD has released economic projections showing two divergent paths for the global economy depending on whether the Iran war ends soon or persists. A quick resolution would result in modest slowdown with 2.8% global growth, while prolonged conflict could cut growth to 1.8% by 2027 and raise inflation significantly. The forecasts highlight how geopolitical disruptions to energy and supply chains threaten economic stability even as AI investment provides some offset.
The Organisation for Economic Co-operation and Development released updated economic projections showing the Middle East conflict has become the dominant factor shaping global economic outlook. Under the optimistic scenario assuming conflict resolution, global growth would reach 2.8% this year with inflation at 4%, only slightly below pre-war expectations. The downside scenario, with prolonged conflict through 2027, would reduce global growth to 1.8% and push inflation 1.3 percentage points higher, hitting economies most dependent on Middle East energy particularly hard. The OECD warns that while AI-driven investment is currently supporting growth—especially in the United States—this same investment is creating new vulnerabilities by increasing dependence on energy-intensive data centers, semiconductor supply chains, and critical trade routes. Central banks face a dilemma: if conflict persists, they may need to raise rates by up to 0.75 percentage points to control inflation even as growth weakens, leaving fiscal policy as the primary tool for economic support despite limited government budgetary room.
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New forecasts lay out 2 rocky paths for global economy
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