London, May 17 (SANA) Oxford Economics said the U.S.-Israeli war on Iran has not fundamentally restructured the global economy, but has deepened economic fragmentation and intensified pressure on international markets, exacerbating trends that were already taking shape — including rising geopolitical tensions, supply chain disruptions, higher inflation, and expanded government spending.
The research firm revised down its global GDP growth forecasts since the war’s outbreak, while noting that the conflict has not materially altered the relative balance of global economic performance, with the United States maintaining its dominant position. The second quarter of 2026 is expected to mark the lowest point for growth, before falling oil prices drive a gradual recovery in the second half of the year. The risk of a major recession remains limited, partly because financial conditions have not tightened sharply, and partly because artificial intelligence investment is acting as a counterweight to the energy price shock.
The Strait of Hormuz: the world economy’s critical chokepoint
Oxford Economics described the Strait of Hormuz as a vital bottleneck for global energy, warning that shipping and insurance costs will remain elevated even if the strait fully reopens, as markets have internalized its vulnerability and the risk of future disruption. Rerouting around the strait is not a straightforward option for container vessels, as it requires multimodal routes via trucks and rail to Indian Ocean ports — routes that already face capacity constraints.
Trade, AI, and government spending
The report said the reshaping of global trade will be driven more by industrial policies and U.S. tariffs than by the war itself, though the conflict may accelerate some countries’ efforts to localize strategic industries such as critical minerals and semiconductor components. Permanent shifts in trade patterns are expected to be limited, with Saudi Arabia and the UAE capable of compensating for oil supply disruptions through additional production capacity.
On AI, the report noted that investment remains resilient, though the closure of the Strait of Hormuz exposed vulnerabilities in semiconductor supply chains that depend on petrochemical intermediates sourced from the Middle East, potentially raising production costs in manufacturing hubs such as Taiwan, South Korea, and Japan.
Oxford Economics also doubled its estimate of global fiscal stimulus compared to pre-war projections, noting that Europe and Asia have provided support through fuel tax cuts and direct subsidies, while the United States may pursue a new fiscal package of up to $800 billion if consumer pressures persist.
The decisive variable
The report concluded that the trajectory of the global economy depends heavily on how long navigation through the Strait of Hormuz remains disrupted: a swift restoration of oil exports would bring down energy prices, ease inflation, and support recovery, while a prolonged disruption would sustain elevated oil prices, deepen inflationary pressures, and produce a sharper economic slowdown.
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