Iran Conflict Could Push World Economy Toward Recession, IMF Warns

The Scott Bessent has said that short-term economic disruption caused by the ongoing US-Israel war with Iran may be necessary to ensure long-term global security.

In an interview with the BBC, Bessent argued that the conflict aims to eliminate the risk of Iran developing nuclear capabilities that could threaten Western nations. He said the potential consequences of a nuclear attack outweigh concerns about immediate economic losses.

However, the International Monetary Fund has warned that the war could significantly slow global growth and, in a worst-case scenario, push the world economy close to recession. Rising oil, gas, and food prices driven partly by disruptions in key supply routes like the Strait of Hormuz are expected to fuel inflation and economic instability.

Despite US concerns, the UK government has stated there is no evidence that Iran is targeting Europe with missiles, although it maintains readiness to respond to any threats.

According to the IMF, prolonged conflict could push global growth below 2% in 2026, with inflation rising sharply and forcing central banks to increase interest rates. IMF Chief Economist Pierre Olivier Gourinchas warned that extended instability could lead to higher unemployment and food insecurity in some regions.

Oil prices surged during the conflict, at one point nearing $120 per barrel, though they have since eased slightly. The economic impact is expected to vary across countries, with energy-dependent economies and those reliant on Middle East supply routes facing the greatest risks.

The IMF also projects that countries such as Iran and Iraq could see economic contractions this year, while others may recover if the conflict ends soon and energy markets stabilise.