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The war in the Middle East has hit economic growth prospects worldwide, with a more severe shock likely should no effective ceasefire is agreed before 2027.
This aerial photo shows a tanker unloading imported crude oil at a terminal port in Qingdao, in China’s eastern Shandong province on June 2, 2026.
/ CHINA OUTOil prices jumped and stock markets diverged Wednesday as fresh Middle East attacks dented hopes of an imminent peace deal. The dollar mostly firmed as Iranian and US forces traded attacks in the Gulf and a drone strike on a passenger terminal in Kuwait’s international airport wounded tens of people and suspended air traffic. The yen strengthened amid speculation Japanese authorities could step in to support their currency following last month’s intervention.
That came as the Japanese cabinet approved a $19 billion supplementary budget to support households struggling with soaring everyday costs driven by the Iran war. The European Union meanwhile said it would loosen its spending rules to help member states manage soaring energy prices sparked by the Middle East war. The war in the Middle East has hit economic growth prospects worldwide, with a more severe shock likely should no effective ceasefire is agreed before 2027, the OECD warned Wednesday.
Global economic growth is forecast to slip to 2.8 percent this year should Gulf energy exports return to pre-conflict levels in the third quarter, the group of 38 industrialised countries said in its quarterly update.
“The longer the disruptions last, the larger the economic and social costs become,” said OECD chief economist Stefano Scarpetta. Many countries would risk falling into recession, he noted, and a drop in investment spending — “including in energy-intensive AI” — would likely push up unemployment. Tokyo’s index closed up more than two percent, helped by a surge in the share price of chipmaker Tokyo Electron. Shanghai, Sydney, Singapore and Manila also gained, though Hong Kong, Mumbai and Wellington retreated.
Jakarta tanked more than five percent on worries about the Indonesian economy amid elevated oil prices and the country’s fiscal outlook.
“Equity markets are once again taking their cue from the technology sector rather than the geopolitical headlines,” said IG chief market analyst Chris Beauchamp. “Tensions surrounding Iran have done little to dent investor appetite, with a string of AI-related announcements providing a more compelling narrative for markets this week.
” The gains followed more record highs Tuesday for the S&P 500 and Nasdaq on Wall Street, where chipmaker Marvell Technology soared more than 32 percent after Nvidia CEO Jensen Huang hailed it as the next trillion-dollar firm. Adding to the positive mood among equity traders was data showing US job openings jumped in April to the highest level in nearly two years.
The reading comes ahead of US employment data Friday that could determine if the Federal Reserve will keep its benchmark rate stable or potentially hike borrowing costs to fight inflation. Visitors look at electronic display boards showing stock prices and economic indicators at the Tokyo Stock Exchange in Tokyo on June 1, 2026.
West Texas Intermediate: UP 2.4 percent at $95.97 a barrelParis – CAC 40: DOWN 0.3 percent at 8,181.88Tokyo – Nikkei 225: UP 2.5 percent at 68,402.13 Shanghai – Composite: UP 0.2 percent at 4,083.97 Dollar/yen: DOWN at 159.79 yen from 159.92 yen
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