PARIS — The Organisation for Economic Cooperation and Development has slashed its global growth outlook in its June 2024 Economic Outlook, citing disruptions from conflict affecting the Strait of Hormuz. Global growth is now expected to slow from 3.4% in 2025 to 2.8% in 2026, before recovering to 3.1% in 2027, assuming a time-limited disruption scenario in which a peace agreement is reached and disruptions to the Strait of Hormuz are swiftly resolved.
In a worse-case scenario, in which disruptions to shipping and energy infrastructure continue well into 2027, global growth would fall sharply to just 2.1% in 2026 and 1.8% in 2027. Some economies could be tipped into, or close to, recession under this prolonged disruption scenario. In that scenario, global inflation is expected to rise by 0.4 percentage points in 2026 and 1.3 percentage points in 2027.
Stefano Scarpetta, the OECD's chief economist, warned that “the longer the disruptions last, the larger the economic and social costs become.” He added that a durable settlement to the current conflict 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.”
The OECD's study explores how the Strait of Hormuz shutdown, coupled with energy infrastructure damage throughout the Gulf, has sent energy prices soaring and pushed up the costs of fertilizers and other key industrial inputs. Scarpetta said, “Unemployment would rise and investment — including in energy-intensive AI — would weaken significantly, with increasing risks of financial market repricing with upside pressures from elevated commodity prices partially offset by weaker final demand.”
The downward trajectory will further complicate the challenge for global central banks already grappling with weaker growth and inflationary pressures. The crisis highlights the vulnerability of global economies to one single chokepoint and underlines the need to strengthen the resilience of supply chains and diversify energy supply. According to the OECD report, “In the near-term, emergency demand-restraint measures and international coordination of strategic energy stocks can help mitigate some of the effects of the supply crunch, but the need to invest more to wean us off the dependency on fossil fuel imports is more urgent than ever.”