War in the Middle East: the OECD more pessimistic for a global economy …

Whether the war in the Middle East continues or not, the OECD said on Wednesday that it expects less growth and more inflation in the world in 2026, due to the rise in energy and fertilizer prices which is penalizing the economy.

The Organization for Economic Co-operation and Development (OECD) lowered its global forecast for economic growth by establishing two scenarios, depending on whether the conflict in the Middle East persists until 2027, but estimated that in all cases the economy was “under pressure”, particularly in France.Â

“The economic effects of this conflict will likely be felt for some time, even after its end, given the months that will be needed to restore damaged infrastructure and transport routes and to move products around the world,” underlines the Paris-based institution in its quarterly report on the world economy.

While the latter was “relatively solid” before the war, supported by investments in technologies, the rise in inflation reduced the purchasing power of consumers, business confidence eroded and supply difficulties appeared.

Very dependent on imports from the Middle East, Asian economies are among the hardest hit, particularly Japan. “But the impact will be felt everywhere,” warns the OECD. HAS

The war triggered on February 28 by a joint Israeli-American attack on Iran led Tehran to block the Strait of Hormuz, a strategic trade route for the transport of crude oil, liquefied natural gas (LNG) and fertilizers.

 

Entering a recession

 

As a result, the OECD lowered its global annual growth forecast. It expected an increase of 2.9% in March, after 3.4% in 2025.

In the event of “disruptions limited in time” and progress towards a peace agreement, growth would be reduced to 2.8%, predicts the OECD. Energy prices would gradually decrease from mid-2026, inflation would decline, central bank rates would remain generally stable and growth would rebound to 3.1% in 2027.

On the other hand, the absence of a peace agreement “for a good part of the year 2027” would cause a big brake on growth, to 2.1% in 2026 and 1.8% in 2027, “thus leading several economies to enter into recession or approach it, and increasing the unemployment,” explains the organization.

In this scenario, energy prices would continue to rise, like inflation, with more supply shortages, interest rates would be raised by 0.5 to 0.75 percentage points and state budgets would tighten.

In addition to the impact on the agricultural sector and food prices, “shortages could be particularly detrimental for certain growth sectors of the global economy, such as AI”, warns the OECD.

 

0.7% in France

 

The prospect of a negotiated outcome to the conflict seems for the moment to be favored by the OECD, even if weeks of indirect negotiations between the United States and Iran have not yet made it possible to end the war.

In a press release, the Trade Union Advisory Commission (TUAC) to the OECD, which represents unions to the institution, however judged that the latter “overestimated the resistance of global growth at a time when workers are experiencing a second crisis of the cost of life linked to energy in the space of four years.”

“The solution is not austerity, higher rates and deregulation, but public investment, progressive taxation and a just transition,” said Veronica Nilsson, TUAC general secretary.

Within the euro zone, assuming limited disruptions, the growth outlook for Germany and France has been lowered to 0.7% (-0.1 point) in 2026. Growth would remain around 2% in the United States and reach 4.5% in China.

Highlighting the high uncertainty over the evolution of the situation, the OECD recommended that support measures for households and businesses be well targeted and limited over time to limit their budgetary costs. Because in the event of prolonged disruptions, “additional recovery measures” could prove necessary, she notes.

The organization also calls on central banks to remain “vigilant and attentive”. She considers “necessary” an adjustment of monetary policy “if we observe signs of generalization of tensions on prices (…) or signs of significant moderation of growth”.