Global economic growth could slow to levels seen during the Covid-19 pandemic and the global financial crisis if the Iran war drags on, the Organisation for Economic Cooperation and Development (OECD) has warned in its latest global economic outlook.
A “prolonged disruption” to energy flows from the Middle East that persists well into 2027 would see global growth slow to 2.1% in 2026 and 1.8% in 2027, the Paris-based organisation said. “Such rates are extremely low outside of major global recessions such as the global financial crisis or the pandemic,” it noted, warning the scenario would leave a “lasting mark on many countries, especially in Asia.”
If the conflict is resolved more quickly, the OECD sees global growth slowing from 3.4% in 2025 to 2.8% in 2026 before picking up to 3.1% in 2027 — broadly in line with pre-war forecasts.
“The global economy entered 2026 with robust momentum, but the outlook has weakened significantly since the start of the conflict in the Middle East, with effects likely to be felt for some time,” OECD Secretary-General Mathias Cormann said. “The longer the disruptions last, the larger the economic and social costs become.”
Cormann told reporters that the current spike in fertiliser prices because of reduced flows through the Strait of Hormuz, if sustained, could push wheat prices up by 13%. “This is not an abstract risk, it is a very real food security risk and it will fall hardest on the most vulnerable economies,” he said.
The warning lands on a Sri Lankan economy already absorbing the war’s costs. The IMF earlier flagged the deepening Hormuz energy shock and a growth cut for commodity-importing economies. Sri Lanka’s monthly fuel bill surged to $886 million in April — up 149.9% year-on-year — and the IMF has cautioned against expanding fuel subsidies to cushion the price shock. The Cormann food security warning will sit alongside fertiliser concerns already raised by Sri Lankan agricultural officials ahead of the Yala planting cycle.
