OECD predicts spate of recessions globally if Iran conflict drags into 2027
Summary
The Organisation for Economic Co-operation and Development (OECD) warns that if the conflict involving Iran continues until 2027, it could cause many economies to slow down or enter recession due to energy shortages and rising prices. The report says this would especially hurt developing countries and could also slow down growth in industries like artificial intelligence that need a lot of energy.Key Facts
- The OECD predicts global economic growth will drop from 3.4% in 2025 to 2.1% this year if the Iran conflict continues.
- Prolonged conflict may cause energy shortages, forcing businesses to limit energy use.
- Prices for oil, gas, fertilisers, and certain industrial materials like sulphur and helium would rise.
- Central banks might face tough choices between raising interest rates to fight inflation and avoiding a recession.
- AI growth in the US could slow due to higher energy costs and limits on hardware supply.
- The conflict has disrupted oil flow through the Strait of Hormuz for over three months, raising global oil prices.
- Developing countries are more vulnerable due to their limited energy reserves, high energy costs for households, and weaker financial safety nets.
- The OECD also envisions a less severe scenario where a peace deal lowers oil prices and global growth remains stronger at 2.8% this year.
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