US Treasury secretary says short-term pain worth long-term security
US Treasury Secretary Says Short-Term Pain Worth Long-Term Security
Scott Bessent, the U.S. Treasury Secretary, argued to the BBC that a “modest economic setback” was necessary to counter the threat of Iranian nuclear strikes targeting major Western cities. He emphasized that the long-term benefits of security outweighed the temporary economic challenges. “Consider the damage to global GDP if a nuclear weapon struck London,” Bessent reflected. “I prioritize long-term stability over short-term forecasts, as the risk of Iranian attacks is now undeniable.”
IMF Warns of Global Recession Risks
The International Monetary Fund (IMF) highlighted concerns that the ongoing US-Israel conflict with Iran could disrupt global economic growth. In a worst-case scenario, where oil, gas, and food prices remain elevated for two consecutive years, global expansion might drop below 2% in 2026. This would bring the world to the brink of a recession, a phenomenon that has occurred just four times since 1980, including during the pandemic.
“A prolonged war would exacerbate inflation, rise in unemployment, and food shortages in several regions,” stated IMF chief economist Pierre-Olivier Gourinchas. “Even if the conflict ceased today, the impact on oil supply would rival the 1970s crisis, though the current reliance on fossil fuels is less intense than before.”
Iran’s Nuclear Ambitions and UK’s Response
Iran maintains its nuclear program is peaceful, but Bessent pointed to evidence of its aggressive posture. He cited the targeting of the U.S. base at Diego Garcia as proof that Iran possesses mid-range missiles capable of reaching London. The UK government, meanwhile, confirmed there was “no assessment” of Iran aiming to attack Europe, yet reiterated its readiness to defend against any threat.
Despite the immediate economic strain, the IMF noted that global growth could stabilize at 3.1% for 2026 if the conflict ends swiftly and Middle Eastern energy production normalizes by mid-year. This projection, slightly lower than the earlier 3.3% forecast, still leaves the UK as the most vulnerable advanced economy, with growth revised down to 0.8% from 1.3% this year. However, the UK is expected to rebound with a 1.3% expansion in 2027.
Energy Price Volatility and Long-Term Outlook
Oil prices surged near $120 during the Iran conflict but have since retreated, currently trading at $95 per barrel. The IMF warned that sustained high energy costs could push inflation to 6% in 2027, prompting central banks to raise interest rates. Nonetheless, reduced dependence on oil may temper consumer impacts compared to past crises, such as the 1970s embargo. The fund also projected a 6.1% contraction in Iran’s economy this year, with recovery anticipated at 3.2% by 2027 if peace is restored soon.
