The OECD’s latest Interim Economic Outlook says the evolving conflict in the Middle East is testing the global economy through an energy supply shock that is expected to slow growth and keep inflation higher for longer. It projects global growth at 2.9% in 2026 and 3.0% in 2027, after steady momentum heading into 2026 from technology-related production, lower effective tariffs on US imports and carryover from 2025. Headline inflation across G20 countries is now projected at 4.0% in 2026, easing to 2.7% in 2027. The baseline outlook assumes current supply disruptions ease over time, but the OECD says risks remain considerable. A longer-lasting disruption, including extended closure of regional oil and gas production facilities or persistent export disruptions through the Strait of Hormuz, would likely push energy prices higher for longer and further weaken growth while raising inflation expectations. The report projects United States growth at 2.0% in 2026 and 1.7% in 2027, euro area growth at 0.8% and 1.2%, and China’s growth at 4.4% and 4.3%. It also warns that higher energy and fertiliser prices could lift food prices, increase the cost of replenishing European gas stocks, add financial market volatility and raise fiscal risks through higher long-term sovereign yields. Policy priorities highlighted in the Outlook include vigilance by central banks to keep inflation expectations anchored, stronger efforts to safeguard public finances, targeted and temporary support measures, lower trade barriers, and medium-term improvements in energy efficiency and reduced dependence on fossil fuel imports.

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