OECD Warns of Global Recession if Iran Conflict Lasts until 2027

JAKARTA - The Iranian conflict in the Middle East has begun to raise new alarms for the world economy. The Organisation for Economic Co-operation and Development, an economic cooperation organization for developed countries, warns that if the crisis continues until 2027, the world could face a major economic slowdown, a surge in energy prices, and a recession in a number of countries.

In its latest Economic Outlook report, quoted from The Guardian, Wednesday, June 3, the OECD outlined a "prolonged disruption" scenario. In this picture, the United States and Iran fail to reach an agreement until 2027.

The impact is not small. The OECD estimates that global gross domestic product or GDP growth could slow to 2.1 percent this year, down from 3.4 percent in 2025. A number of countries are even said to be entering or approaching recessions. Developing countries are expected to be the most vulnerable group.

The biggest pressure comes from energy. The world's oil and gas supply is expected to be increasingly disrupted. In certain conditions, companies can even face forced restrictions on energy use.

The prices of fertilizers and industrial raw materials such as sulfur and helium are also expected to soar due to disrupted supply chains.

The situation puts the central bank and the government in a difficult position. If interest rates are raised too quickly to hold inflation, the economy could slow down further. However, if left alone, the surge in food and energy prices could further depress the public.

The OECD also warned that the boom in artificial intelligence or AI in the United States was also threatened. The rise in energy prices is estimated to increase the operating costs of data centers, which are the backbone of the AI industry.

"Large energy price shocks or energy shortages can increase data center operating costs and hamper the supply of hardware critical to AI systems," the OECD wrote.

As a result, AI investment is at risk of slowing down and the economic growth of countries that have enjoyed a technological investment boom could be dragged down.

US President Donald Trump has previously said several times that an agreement with Tehran is close. The statement had calmed the oil market. However, until now, no agreement has actually been reached.

Negotiations were also delayed after Iran refused to take part in talks as long as Israel was attacking Hezbollah in Lebanon.

Meanwhile, pressure in the Strait of Hormuz has continued to disrupt the world's energy supply for more than three months. This sea route is one of the veins of global oil distribution. When disturbed, world energy prices immediately fluctuate.

OECD Chief Economist Stefano Scarpetta said the Iran conflict is now a "dominant factor" shaping the direction of the global economy.

According to Scarpetta, the most severe impact will be felt by developing countries that have limited energy reserves, more fragile currencies, weak fiscal capacity or government financial capacity, and high dependence on imported energy and food.

The Guardian also reported that the OECD was preparing a milder scenario. If there is progress towards peace, oil prices are expected to start falling in the next few months.

In that condition, global economic growth could still reach 2.8 percent this year and rise to 3.1 percent next year. However, the OECD warned that limited energy disruptions could still occur, especially in Asia.

The report also highlighted the high corporate debt in G20 countries, which reached US$90 trillion in the third quarter of 2025. About a quarter of the debt is due in the next three years and is at risk of being hit by higher interest rates.

The OECD also reminded of the risks from the private credit sector, namely financing from non-bank institutions which have now grown since the 2008 financial crisis. According to the organization, the sector's connection with other financial systems could trigger contagion effects if there is a market correction or a sharp decline in asset prices.

At the end of its report, the OECD assessed that this latest crisis shows the world's dependence on fossil fuels is still too great.

"In the long term, reducing dependence on foreign fossil fuel sources and increasing domestic energy efficiency are important priorities," the OECD wrote.