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OECD warns prolonged Iran energy shock could trigger global recession and spike inflation

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A prolonged disruption in energy supplies resulting from conflict in Iran would deal a severe blow to the global economy, according to a new economic outlook report published on Wednesday.

The research data indicated that such disruptions are highly likely to push countries into recession and lead to an increase in unemployment.

The Organisation for Economic Co-operation and Development (OECD) described the effects of the war in question as the “dominant force shaping the global economic outlook.”

The report noted that if disruptions become persistent, global growth could slow down significantly, falling from 2.1% in 2026 to 1.8% in 2027. This deceleration could depress the world economy to levels not seen since the COVID-19 pandemic and the Great Recession.

“With upward pressures from high commodity prices partially offset by weakening final demand, global inflation would rise by 0.4 percentage points in 2026 and by 1.3 percentage points in 2027,” OECD Chief Economist Stefano Scarpetta stated in the report.

Developing economies with limited energy reserves, alongside Asian economies heavily dependent on crude oil, fuel, and natural gas, were identified as being among the hardest hit by this situation.

Focusing on an alternative short-term scenario, researchers reported that if energy production and shipments through the Strait of Hormuz return to pre-conflict levels, growth could rebound to 3.1% in 2027.

The researchers stated that the vulnerability of the global economy to a “single choke point” underscores the necessity of strengthening supply chains and creating a more diversified energy supply. They emphasized that increasing investment to escape dependence on fossil fuel imports is now more urgent than ever.

The report also pointed out that rising defense spending this year is unlikely to expand productive capacity unless it generates spillover effects in non-defense sectors through innovation.

Scarpetta noted that policymakers face difficult decisions, stating, “Central banks could look through supply-driven price increases as long as inflation expectations remain well-anchored and second-round effects are kept under control. However, a policy move may become necessary if price pressures broaden or if growth weakens significantly.”

Iran’s closure of the Strait of Hormuz has kept oil prices high since the US and Israel launched initial strikes against Iran in late February.

Although average fuel prices in the US have declined due to the influence of recent talks aimed at reaching an agreement to end the conflict, they remained high at $4.26, according to data released by AAA on Wednesday.

Following an average of $3.14 last year, the average last week also remained elevated, standing at the $4.50 level.

Public opinion polls conducted since the beginning of the conflict have revealed that a majority of Americans do not support the war due to the prolonged impacts on the cost of living.

The latest poll, published by Politico on Friday, showed that more than 60% of respondents believe President Trump has not done enough to protect Americans from the economic impacts of the war.

Fifty-three percent of those surveyed expressed that the cost of living is at the worst level they can remember, while a majority stated that their financial situation has deteriorated since Trump returned to office.

Diplomacy

US and Qatar warn EU methane import rules threaten winter energy supply

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The United States and Qatar have urged the European Union to overhaul its planned methane emission regulations for oil and gas imports, warning that the incoming framework threatens energy security.

Beginning next year, the EU regulation will mandate strict methane monitoring and verification requirements for fuel deliveries imported into the bloc.

The rules are designed to curb leaks of the potent greenhouse gas. However, they have drawn fierce opposition from the energy industry and foreign suppliers.

In an open letter addressed to EU leaders, the energy ministers of the US, Qatar, Nigeria, and Algeria—all major gas exporters to Europe—demanded that the EU suspend the legislation and introduce “targeted changes.”

“Importers have already begun the process of purchasing oil and natural gas to be stored for delivery in 2027, and as of now, there is no viable pathway to comply with the regulation,” the letter stated.

Speaking on Wednesday at the Reuters Global Energy Forum in New York, US Energy Secretary Chris Wright said the EU’s “crazy” methane regulations would make liquefied natural gas (LNG) imports from the US and other allied signatory nations impossible.

Wright warned that the move would put EU member states at risk. “The risk of experiencing power outages or heating issues next winter will be quite high. There is no justification for this,” he said.

Speaking to reporters before the letter was published, EU Energy Commissioner Dan Jorgensen indicated openness to discussing ways to ease the implementation of the regulation, but maintained that the bloc would not dilute the policy’s objectives.

“I will not bring this matter back to the table. I am very proud of our methane regulations. We have also faced significant pressure from international companies and countries like the US; our message to them remains the same. We will assist as much as we can to be pragmatic, but we must protect the legislation,” Jorgensen said.

The European Commission has drafted plans to remove penalties for companies violating the law, but has so far refused to rewrite the core rules.

According to a document seen by Reuters, 11 EU governments—including Italy, the Czech Republic, the Netherlands, and Poland—have separately requested that Brussels delay the implementation of the rules by three years, citing energy supply disruptions linked to the war in Ukraine.

EU energy ministers are scheduled to discuss the request on Friday.

According to a study by Wood Mackenzie published in March and backed by the oil and gas industry, nearly half of the EU’s gas imports could struggle to comply with the incoming rules.

However, research published this week by Rystad for the Environmental Defense Fund indicated that the volume of gas already compliant with the current rules is three times the EU’s existing import levels.

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White House requests $672 million from Congress to neutralize Iran nuclear program

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The US administration has requested $672 million from Congress to fund measures aimed at “completely and verifiably halting” Iran’s capacity to develop or acquire nuclear weapons.

According to a Fox News report citing a White House source, the funding request was submitted as part of a supplemental budget proposal.

The requested funds are intended to cover the removal from the country and the disposal of Iran’s nuclear materials, including uranium hexafluoride, various other forms of uranium, and fuel for research reactors.

These resources will also finance US monitoring activities in Iran, support for International Atomic Energy Agency (IAEA) inspections, efforts to combat nuclear smuggling, and the expansion of the Nuclear Emergency Support Team’s (NEST) operations in the Middle East.

In a letter sent to House Speaker Mike Johnson, White House Office of Management and Budget Director Russell Vought stated that these resources are being requested for the US National Nuclear Security Administration (NNSA) within the framework of non-proliferation programs.

The funding will be utilized for the elimination of materials, technology, equipment, and infrastructure linked to Iran’s nuclear program that possess sensitive non-proliferation characteristics.

In total, the White House administration has requested $87.6 billion in supplemental funding from Congress. According to the letter, the vast majority of this budget request is associated with expenditures within the scope of the war with Iran.

Additionally, $768 million was requested for the US Department of Energy under nuclear and energy security, primarily to be used for the NNSA’s activities connected to this operation.

The US and Iran signed a memorandum of understanding on June 18. This memorandum envisages a cessation of hostilities, the conduct of negotiations toward a final agreement within 60 days, the gradual lifting of US restrictions, the unblocking of the Strait of Hormuz, and addressing Iran’s nuclear program.

IAEA Director General Rafael Grossi had previously announced that the agency is ready to participate in the verification process of potential agreements that may be reached between the US and Iran.

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India’s Russian oil imports hit record high as Middle East tensions disrupt markets

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India is increasing imports of Russian oil and coal as supply chain disruptions and rising prices linked to tensions involving Iran reshape global energy flows.

According to a Reuters report citing data from analytics firm Kpler, shipments from Russia to India reached record levels in June.

Kpler estimates that Russian oil deliveries to India will rise to a record 2.55 million barrels per day in June.

That would surpass both the 2.13 million barrels per day recorded in May and the previous high of 2.16 million barrels per day registered in May 2023.

Russia’s share of India’s total oil imports in June is expected to come in at just under 50%. Before the outbreak of conflict in the Middle East, the figure averaged 23% during the three months preceding February 28.

India’s shift toward Russian crude followed the effective closure of the Strait of Hormuz by Iran and a temporary suspension of sanctions on purchases by the administration of US President Donald Trump in an effort to increase market supply.

However, the sanctions waiver expired on June 17 and was not extended by the US Treasury Department.

Reuters noted that this could lead to a decline in purchases of Russian crude, although the outcome will depend on the willingness of Indian refiners and government officials to return to sourcing shipments from Middle Eastern suppliers.

According to Kpler forecasts, imports from Saudi Arabia are expected to remain at 349,000 barrels per day in June. That compares with an average of 832,000 barrels per day during the three months before the conflict.

A similar trend is visible in coal imports. Imports of Russian coal across all grades are expected to reach 3.16 million tonnes in June, compared with 3.27 million tonnes in May.

Both figures would rank as the second and third highest on record, respectively, behind the peak of 3.76 million tonnes registered in May last year.

Russia is also expected to overtake Australia in June to become the second-largest supplier of coal to India, the world’s second-largest coal importer after China.

According to Reuters, Russia is likely to maintain its role as one of India’s key coal suppliers. Future purchases of Russian oil, however, will depend on whether Washington moves to tighten sanctions against Moscow.

New Delhi says oil shipments will not be affected by sanctions

Indian Foreign Minister Subrahmanyam Jaishankar said in mid-June that the country had increased purchases of Russian oil since 2022 at Washington’s request in order to help contain global energy prices.

Jaishankar criticised US restrictions on Russian commodities and urged policymakers not to present such measures as matters of grand principle.

Sujata Sharma, a representative of India’s Ministry of Petroleum and Natural Gas, also said in May that shipments from Russia were continuing and would do so regardless of US decisions concerning sanctions waivers.

Indian refiners reduced imports from Russia in 2025 and turned to suppliers in Saudi Arabia and Iraq amid pressure from the United States and threats of a 25% tariff on Indian goods.

However, Reuters data show that following the outbreak of war in the Middle East and the blockade of the Strait of Hormuz, Indian companies began increasing purchases of Russian crude again in early March.

Russia’s ambassador to New Delhi, Denis Alipov, said at the end of April that Moscow was prepared to supply as much raw material as India was willing to accept.

Russian Foreign Minister Sergey Lavrov later confirmed that Moscow remained committed to its agreements on energy shipments to India.

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