OECD Cuts 2026 Global Growth Forecasts Over Mideast War Fallout

The war in the Middle East has dented economic growth prospects worldwide, with a more severe shock likely if no effective ceasefire is agreed before 2027, the OECD warned Wednesday.

Global economic growth is now forecast to slip to 2.8 percent for 2026 if Gulf exports of oil and gas return to pre-conflict levels in the third quarter, the group of 38 industrialized countries said in its quarterly update. Previously the OECD had forecast full-year global growth of 2.9 percent.

But if the Mideast war continues into next year, however, global growth could slow to 2.1 percent, the OECD saidwell below the average annual growth of 3.4 percent seen from 2013 to 2019, before the COVID pandemic. “The longer the disruptions last, the larger the economic and social costs become,” the group’s chief economist Stefano Scarpetta said in the report. 

Many countries would risk falling into recession, he noted, and a drop in investment spending“including in energy-intensive AI”would likely push up unemployment. Sustained high prices for energy as well as fertilizer and other key products from hydrocarbon production in the Gulf would weigh especially hard on developing countries that have “higher shares of energy and food in householdconsumption”.

Even if the war sparked by US and the Zionist entity strikes on Iran in late February ends in the coming weeks, the OECD forecast global inflation rising to 4.0 percent this year from 3.4 percent in 2025. In this “time-limited disruption scenario”, the group expects US growth to slow to 2.0 percent this year and 1.8 percent in 2027, after growing 2.1 percent last year.

In the eurozone, where many countries are highly dependent on energy imports, GDP growth will slump to 0.8 percent this year after 1.4 percent last year, assuming a Mideast ceasefire is secured in the coming weeks.

Meanwhile, the European Bank for Reconstruction and Development downgraded its economic forecasts Wednesday, noting that the energy price shock triggered by the Middle East war penalized Europe more than the United States. The bank, founded to help former Soviet bloc nations adopt free-market economies, said European gas prices exceeded those in the United States by a factor of five amid a widening gap.

“Electricity prices in Europe are also much higher than in the United States,” the London-based EBRD said in its latest outlook report, which also focused on countries in the Middle East and Africa where it invests. The bank predicted that gross domestic product would slow to 3.1 percent across its regions of operation this year from 3.4 percent in 2025, with Europe more dependent on hydrocarbon imports than the United States. This was a downgrade of 0.5 percentage points from an EBRD forecast in February, before the US-Iran conflict began at the end of that month.

“The conflict in the Middle East has delivered a new shock to regions already navigating weakness in manufacturing industries and fragile fiscal positions,” the bank’s chief economist Beata Javorcik said in a statement. “Higher energy costs are squeezing competitiveness, reigniting inflation and tightening fiscal space at a time when many economies can least afford it,” she added. The EBRD’s biggest growth downgrades were in its Southern and eastern Mediterranean zone, which includes Egypt, Iraq, Jordan and Lebanon.

This follows Zionist entity troops making their deepest incursion into Lebanon in two decades as part of the Middle East war. Lebanon’s economy is expected to contract by two percent this year, according to the EBRD, having forecast in February that it would expand by four percent. The institution is predicting a rebound for Lebanese growth next year, “provided peace is achieved”. The EBRD in April announced it was unlocking five billion euros ($5.8 billion) to help shore up economies hit by the Middle East war.