The world economy is likely to withstand prolonged oil market disruption

Each month Oxford Economics’ team of 450 economists and analysts updates our baseline forecast for 200+ countries using our innovative Global Economic Model. Fully linking individual country models through global assumptions about trade volume and prices, competitiveness, capital flows, interest and exchange rates, and commodity prices, our model provides a rigorous and consistent structure for forecasting and understanding the impact of economic shocks.

Below is just the top-level summary of our analysis of the latest economic developments.

• The renewed hostilities between the US and Iran suggest that a long-term reduction in shipping through the Strait of Hormuz is now the most likely scenario. 
•  We’ve raised our oil price forecast and expect it to average US$85 per barrel over the remainder of this year before gradually falling back to about US$65 by the end of 2027.
• We continue to forecast world GDP will increase by 2.5% this year and 3.1% in 2027. However, our 2026 forecast remains 0.5ppts lower than in February, and we still expect only a partial reversal in 2027.

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