Oil: Middle East conflict reshapes outlook – BNY

Bob Savage highlights that the OECD now sees the Middle East conflict as the main driver of the global outlook, with surging energy and input prices lifting inflation and weighing on growth. The OECD cut its 2026 global GDP forecast and outlines time-limited versus prolonged disruption scenarios, warning inflation could rise notably under a prolonged shock while urging central banks to stay vigilant.

OECD warns on energy-driven risks

"The OECD has warned that the Middle East conflict has become the main driver of the global outlook, with energy and input prices surging since February, lifting inflation while weighing on real incomes and growth."

"It cut its projected global GDP growth for 2026 to 2.8% from 3.4%, while leaving 2027 unchanged at 3.1%."

"Its outlook presents two scenarios: a time-limited disruption, where growth slows modestly before recovering, and a prolonged disruption, where higher energy prices, supply shortages, tighter financial conditions and weaker confidence would depress activity further."

"Inflation could rise by around 0.4 percentage points in 2026 and 1.3 percentage points in 2027 under the prolonged scenario."

"The OECD is urging central banks to remain vigilant where temporarily higher headline inflation resulting from the energy price shock can be looked through provided longer-term inflation expectations remain well-anchored, and says governments should keep energy relief temporary, targeted and well-designed."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)