OECD Warns of «Dark Scenario» if Middle East Energy Crisis Persists to 2027

The OECD warns that a prolonged Middle East energy crisis, lasting into the second half of 2027, would plunge the world into a «dark scenario» of sharply higher interest rates and tumbling growth. Global growth would fall to 2.1% this year and 1.8% next year, rates considered «extremely low outside of big global recessions.» Major central banks, including the US Federal Reserve, would need to raise interest rates by at least half a point to curb inflation risks.

The OECD’s central scenario assumes the crisis resolves soon. Under this, global growth will decline to 2.8% this year from 3.4% in 2025, rising to 3.1% in 2027. US growth would slow to 2% this year from 2.1% in 2025, with US inflation hitting 3.7%—above the Fed’s 2% target. The UK and US are projected to have the joint highest inflation rate among G7 countries this year at 3.7%.

Euro zone growth is expected to slow from 1.4% to 0.8% this year before rising to 1.2% next year. Ireland’s economy is projected to contract by 1% in 2026 due to geopolitical uncertainty and higher energy prices, but grow by 2.9% in 2027. Minister for Finance Simon Harris welcomed the forecasts, noting the challenging international environment.

OECD Secretary General Mathias Cormann highlighted that about one-third of OECD economies are projected to experience negative real wage growth this year, leading to falling living standards. Chief Economist Stefano Scarpetta expressed hope that the world is not already in the «prolonged disruptions scenario,» where energy prices would be 50% higher than futures market levels, causing substantial shortages and damaging AI investment due to high energy demands.