Global growth slows amid Middle East conflict

The Organization for Economic Co-Operation and Development (OECD) reported that global economic growth faces downward pressure from energy market shocks and the Middle East conflict, while investment in artificial intelligence (AI) supports trade.

Global economic growth moderated to 2.6% in the first half of 2026, down from 3.6% in the latter half of 2025 as output fell sharply in countries directly affected by the conflict in the Middle East.

A sharp reduction in energy supply from Gulf economies pushed up consumer prices globally while China helped balance energy markets by reducing its energy imports and oil consumption.

Global merchandise trade recovered gradually despite rising transportation costs; shipments of goods related to artificial intelligence significantly boosted trade growth in Asian economies.

EU natural gas stocks dropped to their lowest levels for this time of year in more than 15 years.

The US government introduced new bilateral tariff rates for multiple countries in July.

Headline inflation remained stable in June and July but increased in August across many G20 economies.

Long-term sovereign bond yields reached their highest levels in 15 years in most major advanced economies.

The organization projected global GDP growth of 2.9% in 2026 and 3% in 2027.

The US economy expanded rapidly amid strong investment in artificial intelligence, leading the OECD to forecast growth of 2.2% in 2026.

The OECD projected growth of 1% for the euro area in both 2026 and 2027.

China’s growth moderated to 4.5% in 2026 due to the government’s anti-involution policies.

India demonstrated strong momentum and received a 7.1% growth projection for the current fiscal year.

Türkiye had a 2.7% growth forecast for 2026 despite facing strong inflationary pressures.

Severe weather events such as El Nino raised concerns about global food commodity prices.

Many central banks raised their policy interest rates to ensure underlying inflation pressures remained contained.

Governments across the globe faced increasingly pressing fiscal challenges due to rising debt and defense spending.