26 March 2026
If you are covering the OECD’s Economic Outlook Interim Report, please see the following comment from Lindsay James, investment strategist at Quilter:
“The UK economy’s growth projections have been hammered by the OECD in its latest economic outlook report, taking the biggest hit from the Iranian conflict out of all the G20 economies with a 0.5% downgrade compared to its previous projection to just 0.7% growth in 2026. 2027 remained the same as previously reported, with 1.3% growth expected.
“Meanwhile, headline inflation is expected to jump to 4% in 2026, before falling to 2.6% in 2027. Comparatively, the US is expected to see inflation spike to 4.2% this year, the highest level of all the G7 countries, before falling more quickly to 1.6% in 2027.
“While the UK should still see some growth this year, albeit minimal, it will depend heavily on how the conflict in Iran plays out. There’s a risk that a resolution could take months rather than weeks unless anything changes soon, and we can expect energy prices to remain structurally higher for some time even after that.
“The world has realised that Iran has the means to fully control the Straits, incidentally something military experts have long been aware of, meaning that concerns will remain that they can again use this leverage in future disagreements or consider a more permanent form of ‘toll booth’ for shipping. As a result, insurance premiums and freight rates will settle at levels higher than they were before this crisis whilst countries are likely to want to rebuild and grow strategic reserves.
“We’ve seen energy facilities damaged, and just how much this will impact supply will take some time to feed through. Six months ago, oil for delivery in December 2026 was priced at $66; it’s currently at $85. Pushing that delivery date out one more year sees the difference narrow, but pricing is still $11 higher than it was before the conflict.
“For energy pricing to return to pre conflict levels it requires a confluence of unlikely events. Firstly it would require global energy supply to return to pre-conflict levels. This may be challenging given the apparent damage to facilities and the limited additional capacity available within the OPEC+ area. It would also require the flow of shipping in the Strait of Hormuz to return to normal; an average of 79 ships per day passed through before the conflict. While this may take some time, in the near term the pain may be partially alleviated if cargoes destined to China and India, which make up around 50% of volumes, can pass through unimpeded. This is something the Regime is suggesting is already possible. However with the current shipping lanes not usable, this is likely to benefit a relatively small number of vessels and thus have limited price impact. Further releases from global oil inventories, which stand at levels well above recent years could help however, provided it was accompanied by a peace agreement.
“It remains the case that the situation could worsen further still, which would have a significant knock-on effect on economies. While it is hoped that a resolution will be achieved sooner rather than later, there’s a risk that the OECD’s outlook becomes a best case scenario.”
