G20 GDP growth dips to 0.7% in Q2 amid Middle East conflict

Economic growth across the G20 slowed in the second quarter of 2026, with Saudi Arabia suffering the sharpest downturn among member nations as the ongoing conflict between the United States and Iran disrupted oil production and trade flows through the Strait of Hormuz.

GDP in the G20 area grew by 0.7% quarter-on-quarter in Q2, down from 0.8% in the previous quarter, according to provisional estimates released by the OECD on Sunday. The data underscores how the Middle East conflict, now stretching into its second year, continues to weigh on global economic momentum even as some economies have adapted to elevated energy costs.oecd

Saudi Arabia Hit Hardest

Saudi Arabia's real GDP contracted by 4.7% year-on-year in the second quarter, driven by a 24.8% collapse in oil activities, according to estimates from the General Authority for Statistics. On a seasonally adjusted basis, GDP fell 4.8% compared with the first quarter, when the economy had expanded by 3.0%. FocusEconomics described the contraction as the weakest reading in six years.saudigazette+3

Non-oil and government activities each grew by just 0.9% year-on-year, failing to offset the steep decline in the oil sector. The downturn traces directly to disruptions around the Strait of Hormuz, where U.S.-Iran hostilities have repeatedly curtailed shipping. Daily vessel traffic through the strait, which normally carries a fifth of the world's oil, dropped sharply during the conflict, according to maritime data firm Kpler.nytimes+1

Ripple Effects Across Global Economies

The conflict's impact extends well beyond the Gulf. In the United States, GDP growth slowed to an annualized rate of 1.5% in Q2, down from 2.1% in the first quarter, according to the Bureau of Economic Analysis. Investopedia noted that "stubbornly high inflation exacerbated by the Iran war" posed ongoing risks to the U.S. expansion.investopedia+1

Spain's economy proved more resilient, recording 0.7% quarter-on-quarter growth in Q2, but the resumption of hostilities since July has driven up oil and gas prices anew, pushing headline inflation to 4.3% in August, according to CaixaBank Research. In British Columbia, the provincial government reported that inflation reached 2.9% in July, "largely due to elevated gasoline prices and global supply-chain disruptions linked to the conflict in the Middle East," with GDP growth forecast at just 0.9% for 2026.caixabankresearch+1

Energy Markets Remain Volatile

Oil prices have surged repeatedly as fighting around the Strait of Hormuz has intensified. In early September, Brent crude hovered around $97 a barrel, up 19% over the prior month, according to Al Jazeera. The Wall Street Journal News Corp ↘ 0.03% reported renewed U.S.-Iran strikes in late August further deepened supply risks.wsj+1

The OECD data arrives as policymakers worldwide grapple with a difficult combination of slowing growth and persistent inflation driven by energy costs — a challenge unlikely to ease without a lasting de-escalation in the Persian Gulf.