OECD GDP growth accelerates to 0.5% in Q2 despite Middle East war

Economic output across OECD member countries grew by 0.5% in the second quarter of 2026, up from 0.4% in the first three months of the year, as advanced economies proved resilient to the drag from the conflict in the Middle East.ara

The acceleration came even as elevated energy prices and supply disruptions tied to fighting in the Persian Gulf weighed on global activity. Brent crude oil remains roughly 29% higher than before the war began, according to the Bundesbank's August monthly report, with the renewed blockade of the Strait of Hormuz in July adding fresh uncertainty to the outlook.fibre2fashion

Diverging Fortunes Across Major Economies

The broader picture showed uneven performance among the world's largest economies. US growth held steady, the euro area improved after a first quarter dampened by a sharp decline in Irish GDP, and China slowed despite strong exports, the Bundesbank reported.fibre2fashion

Germany's economy expanded 0.2% quarter on quarter in Q2, following a revised 0.4% gain in Q1, supported by export demand and resilient industry. However, low capacity utilization and uncertainty from the war and higher interest rates continued to hold back business investment.fibre2fashion

Eurozone Momentum Builds in Q3

Fresh survey data released last week pointed to continued expansion heading into the third quarter. The flash eurozone composite PMI edged up to 52.1 in August from 52.0 in July, a nine-month high, according to S&P Global. Manufacturing output grew at its fastest pace in more than four years, with Germany recording its strongest factory expansion since January 2022.TRADING ECONOMICS+1

Reuters reported that stronger new orders, particularly in manufacturing, and renewed export growth — the first in four and a half years — drove the improvement, while price pressures showed signs of easing.Reuters

Central Banks Navigate Inflation Risks

The European Central Bank raised its key interest rates by 25 basis points at its June meeting, citing inflation pressures from the Middle East war. The Governing Council held rates steady in July but signaled it did not rule out further hikes. Energy prices continued to drive headline inflation in advanced economies, which stood at 3.1% year on year in July, while core inflation — excluding energy and food — was 2.4%.fibre2fashion

The Bundesbank noted that if elevated energy commodity prices persist, businesses are likely to pass on more of the related costs to consumers, keeping the inflation outlook tilted to the upside.