Trade stands at a crossroads

OECD scenarios spell divergent futures for global trade amid energy shock

By Carly Fields

The OECD has laid out two starkly different economic futures for global trade in its latest Economic Outlook.

The report’s scenario analysis makes clear that the trajectory of Middle East-related disruptions to energy flows will determine not only growth, but the structure and resilience of global trade itself.

At the centre of the OECD’s outlook lies a divergence. On one side is a “time-limited disruption scenario” in which supply chains gradually normalise. On the other is a “prolonged disruption scenario” that implies persistent supply shocks, structural damage to trade networks and a reordering of global commerce.

Even in the more optimistic case, global trade is expected to lose momentum. 

 This slowdown reflects both direct and indirect effects of energy disruption. Maritime chokepoints and elevated freight costs have already begun to weigh on flows, particularly between Asia, Europe and the Middle East.

The report notes that trade weakness will be driven by “a sharp decline in trade with the Gulf economies and increasing energy and transport costs”. These factors illustrate how input shocks, rather than demand contraction alone, are now driving trade outcomes.

However, offsets remain. Lower tariff rates in the US and continued demand for AI-related goods are expected to “help to sustain overall global growth”. This highlights a bifurcation within trade itself: while commodity-linked and energy-intensive flows weaken, technology-driven trade continues to provide momentum.

Scenario divergence

The OECD’s two scenarios hinge on the duration of supply disruptions emanating from the Gulf. In the baseline case, energy production recovers from mid-2026, allowing shipping routes and production networks to gradually stabilise. Under this pathway, shortages remain “limited and short lived”, and global trade adjusts rather than contracts structurally.

By contrast, the prolonged disruption scenario represents a fundamentally different trade environment. The report assumes energy prices remain “50% higher” for an extended period, accompanied by “rising global supply shortages that cause disruptions to production in importing and exporting countries”. For global trade, this translates into both supply-side rationing and systemic inefficiencies.

Indeed, the OECD warns that shortages of critical inputs would “result in an enforced rationing of energy for businesses”, combined with weaker confidence and tighter financial conditions. These conditions would compress both supply and demand for traded goods, producing what trade economists recognise as a two-sided shock.

The OECD highlights how disruptions to key inputs—especially those concentrated in the Gulf—cascade through global production networks.

The report notes that the region is a major exporter not only of hydrocarbons but also of industrial inputs such as fertilisers, petrochemicals and gases. As a result, “shortages begin to impact across a range of supply chains, as substitutes are not readily available for many products.”

Semiconductor production, agriculture and chemicals all rely on inputs produced or processed in the region. In a prolonged disruption scenario, these sectors face compounding effects: input scarcity, higher costs and delayed production cycles.

Moreover, indirect dependencies amplify the shock. The OECD emphasises that “indirect linkages via supply chains account for a large share of total exposure and often exceed direct dependence.” This means even economies with limited direct trade links to the Gulf are vulnerable through intermediate goods trade.

Trade geography shifts under pressure

The scenarios also point to a reshaping of global trade geography. In the time-limited case, Asian economies experience the sharpest short-term disruption but recover alongside energy flows. Strong export growth continues in dynamic Asian economies, particularly in technology sectors.

The OECD notes that “many economies in Asia are likely to be hit heavily, reflecting their relatively high reliance on energy inputs from the Gulf economies”. This is significant given Asia’s central position in manufacturing supply chains.

At the same time, energy exporters could see temporary gains through improved terms of trade, though these are constrained if production itself is disrupted. Meanwhile, import-dependent emerging markets face deteriorating balances and rising financing costs, potentially limiting their participation in global trade.

The OECD scenarios highlight longer-term structural shifts in trade policy. The vulnerability of supply chains to a single geographic chokepoint has underscored the need for diversification. The report calls for efforts to “strengthen the resilience of supply chains” and reduce dependency on concentrated sources of supply.

This has direct implications for trade agreements and industrial policy. Governments are likely to prioritise supply chain security, potentially reshaping sourcing strategies, investment flows and trade partnerships. The emphasis on resilience may accelerate trends towards regionalisation and “friend-shoring” of critical industries.

At the same time, the OECD stresses the importance of maintaining openness. It cautions that export restrictions and protectionist measures “only exacerbate global product shortages and push up prices”. For trade policymakers, this presents a delicate balancing act between resilience and openness.

Ultimately, the OECD’s scenarios suggest that global trade is entering a phase defined less by tariffs and more by supply risk, energy security and geopolitical uncertainty. As the report concludes, “growth prospects depend on many factors, including the degree of damage to energy infrastructure… [and] the time it takes for normal trade patterns… to resume.” For the global trading system, those timelines will determine whether 2026 marks a temporary disruption—or the start of a more structural transformation.