The fate of the global economy hinges on the conflict in the Middle East, which has already stifled growth and could trigger recessions and significantly higher inflation, the OECD said.
Price pressures and weakened demand will persist for some time and could even worsen after the potential opening of the Strait of Hormuz, according to the Paris-based organization's latest economic outlook.
Even in a scenario of limited disruptions, the organization raised its inflation forecasts for 2027 and only slightly adjusted the already weak growth forecasts announced in March.
It also presented a more dire scenario of a protracted confrontation that would trigger the deepest global economic slowdown in 40 years (excluding the Covid pandemic and the 2009 financial crisis).
"The conflict in the Middle East has become the dominant force shaping the global economic outlook," said Chief Economist Stefano Scarpetta. "The global economy is under pressure again."
If disruptions persist until 2027, global growth will slow to 1.8%, pushing some economies into or near recession, raising unemployment, weakening investment, including in AI, and increasing the risk of repricing in financial markets, the OECD stated.
Fiscal stimulus will likely shoulder much of the burden, but governments have little room to maneuver due to high public debt. The organization also warned that the extensive support many countries have already provided has the undesirable effect of stimulating energy consumption amid supply shortages.