Global economic growth is expected to slow to 2.8 percent in 2026 as tensions in the Middle East weigh on trade, energy prices and investor confidence, the OECD said on Wednesday.
In its latest Economic Outlook, the Organisation for Economic Co-operation and Development said the world economy, which entered 2026 on a stronger-than-expected footing, is now facing heightened uncertainty driven largely by the ongoing conflict.
It projected global growth to ease from 3.4 percent in 2025 to 2.8 percent in 2026, before recovering slightly to 3.1 percent in 2027.
The Paris-based institution said the conflict has become the dominant factor shaping the global outlook, with economic effects likely to persist even after any resolution.
It outlined two possible scenarios: a baseline case in which disruptions gradually ease from mid-2026 as diplomatic progress helps stabilise energy markets, and a prolonged disruption scenario in which instability continues into 2027.
Under the baseline scenario, global growth stabilises at 2.8 percent in 2026 before rebounding the following year as energy prices ease and supply chains adjust.
However, the OECD warned that an extended conflict would have far more severe consequences, cutting global growth to 2.1 percent in 2026 and 1.8 percent in 2027, potentially pushing some economies close to recession.
Inflation would also rise under the prolonged disruption scenario, driven by higher commodity and transport costs, although weaker demand would partially offset price pressures.
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The OECD cautioned that policymakers face a difficult balancing act, urging governments to avoid measures that could further strain energy markets or worsen inflationary pressures.
It also called for stronger efforts to improve supply chain resilience, diversify energy sources and enhance energy efficiency, arguing that over-reliance on key chokepoints has increased global vulnerability to geopolitical shocks.
The outlook highlights growing concern among international institutions that geopolitical tensions are becoming a central driver of global macroeconomic instability, with implications for trade, investment and fiscal policy worldwide.
