The ongoing conflict in the Middle East is expected to dampen global economic growth and keep inflation elevated through 2027, according to a report released Wednesday by the Organization for Economic Cooperation and Development (OECD). The Paris-based group cited the disruption of energy supplies and key commodities, including fertilizer, as primary factors contributing to the downturn.

The OECD forecast global economic growth to slow to 2.8 percent in 2026, down from 3.4 percent in 2025, before modestly rebounding to 3.1 percent in 2027. These projections assume that oil prices have peaked or will peak soon, followed by a gradual decline as production in the Persian Gulf recovers and regional transport routes, including air and shipping lanes, return to normal. The conflict has caused the closure of the Strait of Hormuz, a critical passage for a significant share of the world’s oil shipments.

Inflation among the Group of 20 economies, which includes major players such as the United States, China, and the European Union, is projected to average 4 percent this year and 3.1 percent next year. These figures are higher than the OECD’s previous estimates for 2027, reflecting continued uncertainty about the conflict’s economic fallout. “The evolution of the Middle East conflict remains uncertain, but its economic consequences are likely to be felt for some time even after its resolution,” the organization said.

The OECD noted that the global economy had entered 2026 in stronger shape than expected and was initially poised for higher growth before recent developments altered outlooks. Stefano Scarpetta, the OECD’s chief economist, highlighted that beyond energy, critical supplies such as fertilizer and helium—which has applications in semiconductor manufacturing—face potential shortages. The scale of damage to energy infrastructure in the region remains unclear.

Global oil inventories have fallen sharply, declining by more than 100 million barrels in both April and May, straining supply particularly in Asian economies heavily reliant on Middle Eastern imports, including India, the Philippines, and Vietnam. Some countries have limited crude oil reserves available for refining fuel products. Even under the OECD’s more optimistic baseline scenario, it warned of possible limited energy shortfalls in some nations, especially in Asia.

Despite these pressures, ongoing robust investment in artificial intelligence and emergency government spending are expected to provide short-term support for growth. Household savings may also cushion consumer spending in affected markets. The United States is forecast to see a slight slowdown, with growth easing to 2 percent in 2026 and 1.8 percent in 2027, down from 2.1 percent in 2025. Eurozone growth is projected to nearly halve to 0.8 percent this year, improving to 1.2 percent next year.

The OECD also outlined a more severe scenario in which energy prices remain elevated well into next year, exacerbating shortages of fuel, fertilizers, and industrial inputs. Under this outlook, global inflation could exceed that of the baseline by more than one percentage point in 2027. Investment could weaken sharply, including in energy-intensive AI projects, while unemployment would rise. Global growth in this case would slow dramatically to 2.1 percent this year and 1.8 percent in 2027, pushing some countries into recession. Scarpetta described this outcome as “half of the average growth rate in the global economy in the past 25 years,” warning it would create a “very dire situation” for businesses and households alike.