The OECD has a message for policymakers and markets alike: the longer the Iran conflict burns, the more the global economy bleeds. In its June 2026 Economic Outlook, the Paris-based organisation cut its global growth forecast from 3.4% to 2.8% — and warned that a prolonged disruption to the Strait of Hormuz could slash that figure almost in half, to 2.1%, pushing some economies to the edge of recession. The arithmetic is stark, the uncertainty is real, and the one supposed bright spot — artificial intelligence investment — depends on the same energy infrastructure that the conflict is actively destroying.
The Strait of Hormuz is not an abstraction. Roughly 21 million barrels of oil pass through it every single day — about a fifth of global oil supply. The U.S.-Iran conflict has disrupted shipping lanes, damaged energy infrastructure throughout the Gulf, and sent Brent crude prices sharply higher just as the world had begun to believe that the energy inflation shock of 2022 was safely behind it. The OECD’s Stefano Scarpetta put it plainly: countries like India are already rationing gas. Japan and South Korea — which have large strategic reserves — can withstand a temporary disruption. But developing economies with limited reserves, high energy and food shares of household consumption, constrained fiscal capacity, and fragile currencies are being hit hardest. The conflict is producing a profoundly unequal global economic shock.
In the OECD’s baseline scenario — a time-limited disruption resolved by mid-2026 — global growth recovers to 3.1% in 2027 as energy prices ease and supply chains normalise. But in the prolonged-disruption scenario, where Hormuz remains disrupted and Gulf energy infrastructure remains damaged well into 2027, the picture darkens considerably. Global growth falls to 2.1% in 2026 and 1.8% in 2027. Inflation rises by 0.4 percentage points in 2026 and 1.3 percentage points in 2027. Unemployment climbs. Investment weakens — including in the energy-intensive infrastructure that AI data centres require. The feedback loop between energy prices, production costs, and consumer purchasing power tightens. Some economies are tipped into recession; others find themselves right at the edge of one.
The inflation dimension deserves particular attention. Central banks in the U.S., Europe, and much of the developed world had successfully brought inflation down from the post-pandemic peaks — a process that took three years and required interest rates that were, by historical standards, high. The Iran-conflict energy shock threatens to reverse that progress. The OECD projects inflation rising by 0.4pp in 2026 even in the benign scenario, and by 1.3pp in 2027 in the prolonged-disruption scenario. For central banks already navigating the narrow path between slowing growth and persistent price pressures, this is the worst possible timing. The Fed, the ECB, and the Bank of England all face the same unenviable choice: hold rates and allow inflation to accelerate, or cut rates and risk validating the price pressure with premature easing. Neither option is good. The conflict has removed what little room for manoeuvre central banks had.
There is one genuinely counterintuitive finding in the OECD’s report: AI investment is the one consistent upside across all scenarios. The Magnificent Seven stocks — the large U.S. technology companies driving AI infrastructure buildout — are maintaining strong capital expenditure programmes, and the OECD estimates that AI is contributing an average of 0.4 percentage points to GDP per capita growth across G20 economies, and 0.9 percentage points in the United States alone. This is the one place where the OECD finds genuine optimism. But Scarpetta was quick to add the caveat that matters most: this AI dividend depends on a resolution to the conflict and the easing of energy prices. Data centres are extraordinarily energy-intensive. The same shock that is threatening to slow global growth is also threatening to slow the AI buildout that is supposed to be the one structural bright spot in the global economic outlook.
The longer-term structural point the OECD makes is worth sitting with: the global economy remains dangerously dependent on a single shipping chokepoint for a fifth of its oil supply. The 2021 Suez Canal blockage and the 2022 Russian energy embargo were smaller-scale reminders of how vulnerable global supply chains are to geographic concentration. The Iran conflict is a much larger version of the same lesson. The response — emergency demand-restraint measures, international coordination of strategic energy reserves, diversification of energy supply — is correct but slow. These are multi-year infrastructure and policy investments. The conflict is happening now. That asymmetry between the speed of the shock and the speed of the structural response is what makes the OECD’s worse-case scenario so dangerous for the countries least able to absorb it.
For markets, the OECD’s warning is a clear risk-off signal. The S&P 500 and Nasdaq have held at or near all-time highs partly on the assumption that the global economy is on a modest, steady growth trajectory with inflation gradually declining. The Iran-conflict scenario introduces genuine binary risk into that assumption. If the conflict resolves quickly — a genuine diplomatic settlement, not just a ceasefire — the OECD’s benign scenario plays out and the global economy recovers to 3.1% growth by 2027. If it does not, the world is looking at the possibility of back-to-back years of near-recession growth, with inflation that central banks cannot easily address without making the slowdown worse. The market consensus that has priced in two Fed rate cuts by early 2027 may need to be substantially revised — in either direction, depending on whether energy prices spike further or a peace settlement provides relief.
The fundamental asymmetry in the OECD’s analysis is between those who can absorb the shock and those who cannot. Large, wealthy economies with strategic reserves, deep capital markets, and flexible currencies — the United States, Japan, South Korea — can ride out a prolonged Hormuz disruption with significant damage but without catastrophe. For the developing economies of Asia, the Middle East, and sub-Saharan Africa, the same shock is a direct threat to economic stability. Scarpetta’s phrase — “the consequences would be global but could prove especially severe for developing economies” — is the clearest summary of an economic conflict that, like most conflicts, is producing winners and losers at a scale that has nothing to do with who started it.
Written by James Wright, Economy Correspondent
