OECD cuts global growth outlook, warns of deeper damage without Iran peace deal

The Organisation for Economic Co-operation and Development (OECD) sharply cut its global growth forecast, warning that the economic fallout from the U.S.-Iran war could deepen significantly without a swift and lasting peace agreement.

The organization projected world growth slowing to 2.8% this year from 3.4% in 2025, with a partial recovery to 3.1% penciled in for 2027 — contingent on energy price pressures beginning to ease around mid-year.

That outlook, however, rests on an optimistic assumption that a peace deal materializes soon and disruptions to the Strait of Hormuz are resolved quickly, OECD chief economist Stefano Scarpetta said in the group’s June Economic Outlook.

In a darker scenario where shipping and energy disruptions persist deep into 2027, global growth could collapse to just 2.1% this year and slide further to 1.8% in 2027, a trajectory that would push some economies into recession or close to it, Scarpetta warned.

The report examines how the closure of the Strait of Hormuz, combined with damage to energy infrastructure across the Gulf, has sent energy prices surging and driven up costs for fertilizers and other key industrial inputs. Even after a resolution is reached, the OECD cautioned, the war’s economic consequences are likely to linger.

Scarpetta said a durable settlement would not only bring relief to the region but also “lay the groundwork for a resolution to the disruptions it has caused to the global economy,” adding that “the longer the disruptions last, the larger the economic and social costs