US Treasury Secretary: Short-Term Economic Pain Worth It for Long-Term Security

US Treasury Secretary Scott Bessent has stated that a "small bit of economic pain" is worthwhile for long-term international security, as the International Monetary Fund (IMF) warns that the US-Israel war with Iran could plunge the global economy into recession.

Bessent emphasized that the conflict aims to eliminate the threat of Iranian nuclear strikes on Western capitals, saying "I wonder what the hit to global GDP would be if a nuclear weapon hit London... I am saying that I am less concerned about short-term forecasts, for long-term security."

Global Economic Impact

The IMF has warned that in a worst-case scenario, where oil, gas, and food prices spike and remain high, global growth could fall below 2% in 2026, potentially leading to a global recession.

Energy prices have soared since the war began, with the IMF predicting that oil prices could reach an average of $110 per barrel this year and $125 in 2027, leading to inflation of up to 6% next year.

IMF chief economist Pierre-Olivier Gourinchas cautioned that a prolonged conflict would lead to spiraling inflation, push up unemployment, and result in food insecurity in some countries.

Country-Specific Impacts

The UK government has said there is "no assessment" that Iran is trying to target Europe with missiles, but the IMF has cut its estimate for UK growth this year to 0.8%, from a previous prediction of 1.3%.

Oil exporting nations in the Gulf are likely to see a sharp slowdown in economic growth, with Iran's economy expected to shrink by 6.1% this year, and Qatar's economy predicted to contract by 8.6% in 2026.

Saudi Arabia, however, is expected to see its growth slow in 2026 but still expand by 3.1%, with a projected growth of 4.5% next year.

Russia is one country that has benefited from the surge in oil prices, with its economy expected to grow by 1.1% this year and next, ahead of previous predictions.