US Treasury Secretary Advocates Economic Sacrifice for Long-Term Security
Scott Bessent, the U.S. Treasury secretary, emphasized to the BBC that accepting a “modest economic sacrifice” was necessary to counter the possibility of Iranian nuclear strikes on Western cities. He stated that the long-term security gains would outweigh short-term economic losses, even as the International Monetary Fund (IMF) cautioned that the ongoing U.S.-Israel conflict with Iran could lead to a global economic downturn.
“I question the global GDP impact if a nuclear weapon struck London,” Bessent remarked. “My focus is more on safeguarding long-term stability than on immediate economic forecasts.”
Iran has consistently maintained its nuclear program is purely peaceful. Meanwhile, the UK government noted there was “no evidence” Iran aimed to target Europe with missiles, though it highlighted its readiness to defend against any threats. Bessent argued that the risk of Iranian nuclear capabilities posed a greater danger than the economic costs, citing the recent missile attacks on Diego Garcia as proof of Iran’s intent.
IMF’s Global Economic Outlook
The IMF’s World Economic Outlook report warned that a worst-case scenario—marked by surging oil, gas, and food prices over two consecutive years—could push global growth below 2% in 2026. Such a decline would bring the world to the brink of recession, a phenomenon that has occurred just four times since 1980, notably during the pandemic.
Energy costs have spiked since the conflict began over six weeks ago, following the closure of the Strait of Hormuz and stalled peace talks. The IMF warned that prolonged hostilities could disrupt oil supply chains, mirroring the 1970s crisis when Arab producers embargoed the U.S. and allies. However, it noted the world’s reduced reliance on fossil fuels might mitigate consumer impacts.
UK’s Economic Impact
The IMF projected the UK would suffer the most from the energy shock linked to the war, slashing its growth forecast for 2026 from 1.3% to 0.8%. Despite this, it predicted a recovery of 1.3% in the following year. Meanwhile, oil-exporting Gulf nations face sharp economic declines, with Iran’s economy expected to contract by 6.1% this year. A rebound of 3.2% in 2027 is possible if the conflict resolves swiftly.
Currently, oil prices have dipped to $95 per barrel after reaching nearly $120 during the conflict. If energy production normalizes by mid-2026, the IMF estimates global growth could stabilize at 3.1% for 2026, slightly below earlier projections. However, the risk of recession remains elevated if conditions persist beyond 2026.
“A prolonged conflict would drive inflation, raise unemployment, and heighten food shortages,” warned IMF chief economist Pierre-Olivier Gourinchas. “Even a short-term disruption could match the severity of the 1970s oil crisis.”
On Sunday, U.S. President Donald Trump announced a naval blockade of Iranian ports to intensify pressure on the country. The move underscores the ongoing geopolitical tensions shaping global economic dynamics.
