War will trigger the biggest inflation spike in the U.S. among the G7 countries

The crisis in the Middle East will trigger a jump in inflation in the United States to 4.2% this year - the highest among the G7 countries, according to the interim forecast of the Organization for Economic Cooperation and Development (OECD). A sharp rise in energy prices will accelerate prices around the world and pose serious risks to global economic growth, especially in the event of further disruptions to resource exports, the researchers said.

Military action in Iran has forced the OECD to revise economic expectations for the world's largest economy: the forecast for overall inflation in the United States for 2026 has been raised by 1.2 percentage points (p.p.) - to 4.2%. At the same time, researchers predict a slowdown in the U.S. economy. If GDP growth is expected to reach 2% in 2026, it will drop to 1.7% by 2027.

Experts explain this by the fact that the effect of large-scale investments in AI will be gradually offset by the decline in real incomes and consumer spending. And although the current OECD forecast for US GDP growth for 2026 (at 2%) is formally higher than December estimates (1.7%), Reuters notes that the previous forecast was made before the US Supreme Court overturned US President Donald Trump's trade duties.

Prior to the war with Iran, global economic growth was showing resilience, supported by, among other things, increased capital spending on AI and a rally in stock markets, the Financial Times points out. However, forecasts changed after the US and Israel launched strikes against Iran in late February. That triggered a surge in oil and natural gas prices, setting off a chain reaction in markets for other commodities, including metals and fertilizers.

According to the latest OECD data, global economic growth will slow from 3.3% in 2025 to 2.9% in 2026. Global GDP is expected to accelerate to 3% in 2027. The current forecast for this indicator for 2026 is generally the same as in December, but preliminary data indicated that global GDP growth could have been revised upward by about 0.3 p.p., if the conflict had not escalated, writes Reuters.

The OECD also presented a "pessimistic scenario" for the global economy. If the price of oil in the second quarter of 2026 fixes around $135 per barrel, global output could be 0.5% below the baseline forecast, and consumer prices would jump by almost 1%, notes the Financial Times.

- In Ma, GDP growth will slow from 5% in 2025 to 4.4% in 2026 and 4.3% in 2027, according to the OECD forecast.

- Eurozone GDP growth is expected to fall to 0.8% in 2026 due to the impact of energy prices, before picking up to 1.2% in 2027 - driven by higher defense spending. This was a major downgrade from December, when the OECD forecast eurozone economic growth of 1.2% in 2026 and 1.4% for 2027.

- Japan's GDP is forecast to grow 0.9% in 2026 and 2027 - rising energy import costs are overwhelming sustainable business investment, the report said.

- At the same time, the UK, according to the OECD, will face the most serious economic blow among the G7 countries because of the war in Iran: the organization has sharply reduced in the interim forecast expectations for GDP growth in the country to 0.7% and raised expectations for inflation to 4%. This has become a serious challenge for the government of Prime Minister Keir Starmer, notes Bloomberg. Before the war, the UK was expected to outperform its European counterparts in 2026, with its economic growth accelerating in the second half of the year.

- Due to the sharp rise in energy prices, the projected inflation in the G20 countries in 2026 will be 4%, which is 1.2 p.p. higher than previous OECD expectations. It is expected to fall to 2.7% in 2027.

The projections in the OECD Economic Outlook are based on the technical assumption that energy market disruptions will ease over time and that oil, gas and fertilizer prices will start to gradually decline from mid-2026, Reuters writes.

The OECD's forecast for inflation in the US is noticeably higher than the estimates of the Fed and many private analysts. This discrepancy is explained by the fact that the organization expects a more persistent energy shock and takes into account the continuing pressure from last year's increase in U.S. trade duties, notes the Financial Times.

The Fed is still cautiously optimistic: last week the agency confirmed plans to cut rates this year. However, the head of the regulator Jerome Powell emphasized that due to the war with Iran any forecasts have become "much more uncertain than usual".

On March 25, Citrini Research, whose viral "prophecy" about the risks of AI development to the economy crashed the market in February, unveiled a new forecast. Citrini's founder warns that a slowdown caused by rising oil prices due to the war in Iran could pull the stock market down. However - contrary to popular belief - he believes the Fed will "ignore" the shock from high energy prices and cut rates within a year.

This article was AI-translated and verified by a human editor