PARIS, France — The OECD said Thursday it was cutting its eurozone growth outlook and forecasting higher inflation for 2026 after the Middle East war caused energy prices to skyrocket.

 

The Organization for Economic Cooperation and Development lowered its growth forecast for the currency union by 0.4 percentage points to 0.8 per cent, with the continent's top two economies, Germany and France, both down 0.2 points to 0.8 per cent each.

 

The organisation also raised its inflation forecast for the eurozone by 0.7 points to 2.6 per cent, while the global growth forecast remains at 2.9 per cent for this year.

 

"The energy price surge and the unpredictable nature of the evolving conflict in the Middle East will raise costs and lower demand, offsetting the tailwinds from strong technology-related investment and production, lower effective tariff rates and the momentum carried over from 2025," it said in the report.

 

The OECD noted that global growth had been holding up "well" before the war and that it could have been 0.3 percentage points higher had the conflict not escalated.

 

The report assumes that energy disruptions will ease starting in mid-2026, though it warned of the uncertainties surrounding the war.

 

"The breadth and duration of the conflict are very uncertain, but a prolonged period of higher energy prices will add markedly to business costs and raise consumer price inflation, with adverse consequences for growth," it said.

 

The organisation cites, in particular, the price of urea (one of the main nitrogen-based fertilisers), which has risen by more than 40 per cent since mid-February, which could reduce crop yields in 2027.