Global economy struggles to deal with trade disruptions

• GDP growth projected to slow to 2.9pc in 2026, rise to 3.0pc in 2027• WTO chief urges overhaul of global trade system• G7 foreign ministers meet near Paris to discuss war• Asian countries, including Vietnam, Thailand and Sri Lanka, turn to Russian oil

PARIS: The escalating conflict in the Middle East has knocked the global economy off a stronger gro­w­­th path, the Organisation for Econo­mic Cooperation and Development (OECD) warned on Thursday, as a near-halt in energy shipments through the Strait of Hormuz threatens to push inflation sharply higher.

The Paris-based organisation said the global economy had been on course for stronger-than-expected growth before the war in Iran erupted, but that prospect has now all but disappeared.

Global GDP growth is now proje­c­ted to ease from 3.3 per cent last year to 2.9pc in 2026 before edging up to 3.0pc in 2027, as an energy price surge and the unpredictable nature of the conflict offset tailwinds from strong technology-related investm­ent, lower effective tariff rates and momentum carried over from 2025.

With energy prices now soaring, G20 inflation is projected to be 1.2 percentage points higher than previously expected in 2026 at 4.0pc, before easing to 2.7pc in 2027.

In an adverse scenario where ene­rgy prices peak higher and stay elevated longer, global growth would be 0.5 per cent points lower by the second year of the shock and inflation would be 0.9pc points higher, the OECD said.

The war is compounding an already complex picture on trade.

US bilateral tariff rates have declined following the US Supreme Court ruling against tariffs imposed under the International Emergency Economic Powers Act, with particularly large reductions for several emerging market economies including Brazil, China and........

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