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Economy
Jun 03, 2026
Analyzed by Llama- 4 Scout 17B 16E Instruct

OECD Warns of Global Recessions if Iran Conflict Drags On

AI Summary
The OECD has warned that if the Middle East conflict drags on into 2027, it could lead to a spate of global recessions, energy shortages, and reduced economic growth. The organisation's latest Economic Outlook forecasts a 'prolonged disruption' scenario where global GDP growth would be reduced to 2.1% this year, from 3.4% in 2025.

The OECD's Warning

The Organisation for Economic Co-operation and Development (OECD) has issued a stark warning that if the Middle East conflict drags on into 2027, it could have severe consequences for the global economy. According to the organisation's latest Economic Outlook, a 'prolonged disruption' scenario would reduce global GDP growth to 2.1% this year, from 3.4% in 2025.

The Prolonged Disruption Scenario

In this scenario, the OECD forecasts that some economies would be pushed into or close to recession, with emerging economies hit hardest. Oil and gas shortages would result in 'enforced rationing' of energy for businesses, while the price of fertilisers and other affected inputs into industrial processes would also rise.

The Data Analysis

The OECD's forecasts paint a grim picture:

  • Global GDP growth would be reduced to 2.1% this year, from 3.4% in 2025.
  • Emerging economies would be hit hardest.
  • Oil and gas shortages would lead to 'enforced rationing' of energy for businesses.

The Impact Analysis

The OECD's warning highlights the significant risks associated with a prolonged conflict in the Middle East. The organisation's chief economist, Stefano Scarpetta, described the Iran conflict as 'the dominant force shaping the global economic outlook.' The consequences of a prolonged disruption would be felt globally, but could prove especially severe for developing economies with limited energy reserves, higher shares of energy and food in household consumption, constrained fiscal capacity, and weak social safety nets.

The Prediction

The OECD presents an alternative, less catastrophic scenario, in which progress towards a durable peace agreement allows oil prices to decline over the coming weeks and months. In this scenario, global GDP growth would be 2.8% – a downgrade on last year but significantly stronger than in the 'prolonged disruption' case. However, the OECD's warning serves as a reminder of the urgent need to diversify energy sources and reduce reliance on fossil fuels to mitigate the impact of future shocks.