FX.co ★ Global economy may face worst slowdown in 40 years if Middle East crisis drags on through 2027

The global economy could face an unprecedented slowdown if the armed conflict in the Middle East drags on through 2027. The Organization for Economic Cooperation and Development (OECD) says that under that pessimistic scenario, global gross domestic product growth could fall to a critical 1.8%. Excluding the extraordinary episodes of the COVID‑19 pandemic and the 2008 global financial crisis, the economic fallout of a prolonged Iran crisis may trigger the largest and deepest decline in business activity in the past 40 years.

A long continuation of the US‑Iran war will inevitably push a number of countries into full recessions or bring them to the brink of economic collapse. The OECD stresses that a protracted phase of confrontation could produce a sharp rise in worldwide unemployment and provoke a critical contraction in investment. High‑tech sectors, including funding for artificial intelligence projects, will be among those hit, removing one of the key engines of the global market.

The OECD’s gloomy assessments echo findings from other authoritative research centers. Rapidan Energy Group has warned that the global financial system risks a repeat of the 2008 collapse if the Strait of Hormuz remains fully blocked to commercial shipping at least through August. In that case, a severe imbalance between global demand and supply of raw materials would rapidly deplete accumulated oil stocks and ultimately destabilize international trade.