\n<\/p>\n
If the Middle East conflict drags on into next year it would hit global growth hard, driving some economies into recession and causing energy shortages, according to forecasts from the Organisation for Economic Co-operation <\/strong><\/em>and Development.<\/p>\n In its latest Economic Outlook, the Paris-based club of industrialised countries lays out a \u201cprolonged disruption\u201d scenario, in which there is no agreement between the US and Iran until 2027.<\/p>\n It forecasts such a scenario would reduce global GDP growth to 2.1% this year, from 3.4% in 2025, \u201cpushing some economies into or close to recession\u201d \u2013 with emerging economies hit hardest.<\/p>\n Oil and gas shortages would result in \u201cenforced rationing\u201d of energy for businesses, while \u201cthe price of fertilisers and other affected inputs into industrial processes, such as sulphur and helium, would also rise as supply is curtailed\u201d.<\/p>\n It would create headaches for policymakers, who could face recession if they raised interest rates too rapidly to see off rising inflation risk as energy and food prices surge.<\/p>\n The analysis suggests the long-running US AI boom could be at risk, too: \u201cThe significant energy price shocks or energy shortages associated with the prolonged disruption scenario would increase datacentre operating costs and constrain the supply of critical hardware used in AI systems.\u201d<\/p>\n This could \u201cfurther reduce the capacity and incentive for AI investment, leading to notably weaker growth in those economies currently being boosted by AI-related investment and production\u201d, it says.<\/p>\n Donald Trump has repeatedly suggested in recent weeks that a deal with Tehran is imminent, helping to calm oil markets, but nothing has so far materialised. Talks are now suspended, with Iran refusing to take part in discussions while Israel continues attacking Hezbollah in Lebanon.<\/p>\n The chokehold on the crucial strait of Hormuz has been squeezing international oil supplies for more than three months, driving up prices and prompting emergency measures across scores of countries.<\/p>\n In a foreword to its twice-yearly snapshot, the OECD\u2019s chief economist, Stefano Scarpetta, described the Iran conflict as \u201cthe dominant force shaping the global economic outlook\u201d.<\/p>\n In the \u201cprolonged disruption\u201d scenario, he said: \u201cThe consequences would be global but could prove especially severe for developing economies with limited energy reserves, higher shares of energy and food in household consumption, constrained fiscal capacity and weak social safety nets, low private savings buffers and more fragile currencies.\u201d<\/p>\n The OECD also presents an alternative, less catastrophic scenario, in which progress towards a durable peace agreement allows oil prices to decline over the coming weeks and months.<\/p>\n There would still be \u201csome limited energy shortages in some economies, especially in Asia\u201d, the OECD\u2019s economists predict, but global GDP growth would be 2.8% \u2013 a downgrade on last year but significantly stronger than in the \u201cprolonged disruption\u201d case. It would be expected to pick up to 3.1% next year.<\/p>\n In either scenario, the cost of borrowing for corporations is likely to increase as a result of the damage to confidence, the OECD fears.<\/p>\n It points out that total corporate debt in G20 economies was $90tn (\u00a366tn) by the third quarter of 2025, with a quarter of that maturing in the next three years, which could roll on to higher interest rates.<\/p>\n And the report points to concerns about the riskiness of the opaque private credit sector, which has become an increasingly important lender to companies since the 2008 financial crisis.<\/p>\n It says that private credit\u2019s interconnectedness with other parts of the financial sector could create \u201cadverse spillover risks\u201d in the event of a correction.<\/p>\n The OECD argues that the severity of the impact of this latest oil shock, started by the Iran conflict, underlines the importance of weaning the global economy off fossil fuels and diversifying energy sources.<\/p>\n \u201cIn the longer term, reducing reliance on foreign sources of fossil fuels and improving energy efficiency in the domestic economy are key priorities, and more pressing the longer the current disruption to global energy markets persists,\u201d it says.<\/p>\n","protected":false},"excerpt":{"rendered":" If the Middle East conflict drags on into next year it would hit global growth hard, driving some economies into recession and causing energy shortages, according to forecasts from the Organisation for Economic Co-operation and Development. In its latest Economic Outlook, the Paris-based club of industrialised countries lays out a \u201cprolonged disruption\u201d scenario, in which<\/p>\n","protected":false},"author":1,"featured_media":50032,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[267,15618,7858,84,14218,13666,24680,23040],"class_list":{"0":"post-50031","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-conflict","9":"tag-drags","10":"tag-globally","11":"tag-iran","12":"tag-oecd","13":"tag-predicts","14":"tag-recessions","15":"tag-spate"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/50031","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=50031"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/50031\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/50032"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=50031"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=50031"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=50031"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}