OECD predicts spate of recessions globally if Iran conflict drags into 2027
The OECD says a drawn-out Iran conflict could slow global growth sharply, trigger recessions in some economies, and worsen energy shortages.
Intelligence analysis by GPT-5.4 Mini
The OECD warns that a prolonged Middle East conflict, with no US-Iran deal until 2027, could cut world growth to 2.1% this year and push some economies into recession. A faster peace path would still weaken growth, but less severely.
The OECD is warning that if the fighting around Iran keeps dragging on, the world could run low on fuel and prices could jump. That is like a school bus trip getting delayed because the road is blocked and the gas tank is harder to fill.
Analysis
What the OECD is warning
The OECD’s latest Economic Outlook says the Iran conflict is now the main force shaping the global economy. In its most severe "prolonged disruption" case, where no agreement between the US and Iran arrives until 2027, global GDP growth would fall to 2.1% this year from 3.4% in 2025.
The OECD says that outcome could push some economies into or close to recession, with emerging economies likely to suffer most. It also warns of oil and gas shortages that would force rationing for businesses, while prices for fertilisers and other industrial inputs could rise as supplies are cut.
Inflation, rates and investment
The report says policymakers could face a hard trade-off: raising interest rates too quickly might tip economies into recession, but moving too slowly could allow inflation to rise further as energy and food prices climb. It also says the shock could damage confidence and raise borrowing costs for companies.
The OECD points to corporate debt in G20 economies, which it says reached $90tn by the third quarter of 2025, with a quarter maturing in the next three years. It also flags risk in the private credit market, saying its links to the wider financial system could create spillover risks if prices correct.
A less severe path is still weaker than normal
The OECD’s milder scenario assumes progress toward a durable peace deal, which would allow oil prices to ease over the coming weeks and months. Even then, it expects some limited energy shortages in parts of Asia, global GDP growth of 2.8% this year, and 3.1% next year.
The report also says the shock underscores the case for reducing dependence on imported fossil fuels and improving energy efficiency.
Key points
- The OECD says the Iran conflict is the dominant force shaping the global economic outlook.
- In a prolonged disruption scenario, global GDP growth would slow to 2.1% this year from 3.4% in 2025.
- The OECD warns of oil and gas shortages, rationing for businesses, and higher prices for fertilisers and industrial inputs.
- It says policymakers could struggle to balance recession risk against rising inflation from energy and food shocks.
- The report also flags higher corporate borrowing costs and risks in the private credit sector.
If diplomacy makes progress and a durable peace agreement takes shape, oil prices could fall over the coming weeks and months. The OECD says that would still leave some energy shortages in parts of Asia, but global growth would be stronger than in the severe disruption case.
If the conflict keeps going without a US-Iran deal until 2027, the OECD says global growth could slow to 2.1% and some economies could fall into recession. Energy shortages, higher inflation, and tighter credit conditions could then feed into weaker investment and more strain on vulnerable countries.
