US inflation is set to surge to 4.2 percent this year, the highest among G7 nations, as Middle East tensions drive energy prices higher, according to a stark warning from the OECD. The Paris-based organization predicts the US-Israeli conflict with Iran will push energy costs up sharply, with ripple effects across global markets.

Beyond the US, countries including China, South Korea, and India face similar inflationary pressures from the energy shock. The OECD warns that a prolonged conflict could result in significant energy shortages, with Gulf states accounting for 34 percent of global urea exports and half of all sulphur exports. Industrial supply chains, particularly semiconductors, face disruption risks.

The economic fallout extends beyond inflation. US economic growth is expected to slow to 2 percent this year and 1.7 percent in 2027, while global growth forecasts have been slashed from 3.3 percent to 2.9 percent. The OECD notes that early-year optimism about AI-driven capital spending and stock market gains has been erased by the conflict's impact on oil and natural gas prices.