OECD cuts 2026 global growth to 2.8% as Iran war disrupts Hormuz

The OECD cut its 2026 global growth forecast to 2.8% on Wednesday, warning that prolonged disruption to energy flows through the Strait of Hormuz could push some economies into recession.

"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 OECD said in its latest Economic Outlook.

Under a baseline scenario where energy prices have peaked, global growth slows from 3.4% in 2025 to 2.8% in 2026 before recovering to 3.1% in 2027. But if energy disruption persists well into next year, growth could slump to 2.1% in 2026 and 1.8% in 2027 — rates not seen outside the 2008 financial crisis or the COVID-19 pandemic. Higher energy prices could add 0.4 percentage points to global inflation in 2026 and 1.3 percentage points in 2027, the OECD said, likely prompting central banks to raise interest rates by 0.5 to 0.75 percentage points in the short term.

The warning underscores how Iran's Feb. 28 blockade of the Strait of Hormuz — which handles about 20% of the world's oil and liquefied natural gas — has become the largest oil supply disruption in history. Some economies could fall into outright recession, with Asian countries reliant on Middle East energy expected to be hit hardest, the OECD said.

Hormuz Shipping May Never Fully Recover

Even if the war ends and the strait reopens, shipping volumes may not return to pre-war levels, analysts said. Richard Meade, editor-in-chief of Lloyd's List, estimated that traffic could recover to only 60% to 70% of pre-conflict levels. Ships with ties to China would likely pass relatively freely, while Western vessels may need bilateral agreements with Iran on a case-by-case basis.

"The Strait of Hormuz will be permanently divided, with the right to access no longer based on the principle of freedom of navigation, but on the political stance of each country," Meade said.

Helima Croft, head of global commodity strategy at RBC Capital Markets, said the volume of oil tankers passing through the strait before the war may have reached a long-term peak. The lesson from the Red Sea crisis — where Houthi attacks cut daily ship transits from 75 to 31 and volumes have not recovered even after attacks ceased — shows that geopolitical instability can have lasting effects on strategic trade chokepoints, analysts said.

Divergent Impact Across Major Economies

The OECD's baseline projections show uneven outcomes. US growth is expected to ease to 2.0% in 2026 and 1.8% in 2027, supported by stronger energy exports that partly offset higher prices on household purchasing power. The euro zone is forecast to slow to 0.8% this year before recovering to 1.2% in 2027, as resilient labor markets and higher defense spending help offset government belt-tightening.

China's growth is projected to slow to 4.5% in 2026 and 4.3% in 2027, with ample energy reserves limiting exposure to oil price spikes. The UK is expected to see growth of 0.9% in 2026 and 1.1% in 2027, with inflation rising to 3.7% this year before easing to 2.4% next year.

Inflation across G20 economies is forecast to peak at 4% this year before slowing to 3.1% in 2027, with interest rates largely on hold in 2026 and cuts expected next year, the OECD said.

Energy exporters in the Middle East are accelerating efforts to bypass Hormuz. The United Arab Emirates is expediting construction of a second oil pipeline that would circumvent the strait, with a scheduled opening in 2027. US Energy Secretary Chris Wright said the importance of the Strait of Hormuz to the global energy system will diminish after the war as producing countries invest more in alternative infrastructure.

"In the future, there will be alternative routes for exporting energy from the Persian Gulf," Wright said. "We will see the importance of the Strait of Hormuz diminish."

This article is for informational purposes only and does not constitute investment advice.