The OECD is urging governments to rapidly phase out costly fuel duty cuts implemented after the Iran conflict began. More than 25 countries, including EU member states, Brazil, and India, have reduced fuel taxes to shield consumers from energy price shocks, but OECD chief economist Stefano Scarpetta warns these measures are too expensive to maintain.

Scarpetta, who took the role this month, points to the 2022 European energy crisis as evidence that subsidies fuel inflation, create fiscal problems, and reduce incentives to cut fossil fuel dependence. The European Commission has also cautioned EU member states against excessive spending to protect consumers from high oil and gas prices, warning it could trigger a fiscal crisis.

The OECD still expects the Middle East conflict to drive inflation higher and slow growth, though exports may resume through the Strait of Hormuz following the US-Iran ceasefire. Scarpetta emphasizes that energy support measures should be time-limited and targeted at low-income households and energy-intensive businesses, while preventing companies from profiteering through measures like the UK's proposed "fuel finder" tool.