US Treasury Secretary Scott Bessent defended the ongoing military conflict with Iran on Tuesday, telling the BBC that a "small bit of economic pain" is a necessary price to ensure long-term international security. Bessent argued that the US and Israel have successfully removed the "tail risk" of potential Iranian nuclear strikes against Western capitals.
"I wonder what the hit to global GDP would be if a nuclear weapon hit London," Bessent told the BBC. "I am saying that I am less concerned about short-term forecasts, for long-term security."
Despite the Treasury Secretary's assessment, the International Monetary Fund (IMF) issued a stark warning in its latest World Economic Outlook. The organization stated that if oil, gas, and food prices remain at current elevated levels through 2027, global economic growth could fall below 2%. Such a contraction would mirror the economic distress seen only four times since 1980, including the height of the Covid-19 pandemic.
Global economic instability and regional tensions
The conflict, now in its seventh week, has significantly disrupted global trade following the effective closure of the Strait of Hormuz. While Bessent cited the Iranian strike on Diego Garcia as evidence of the regime’s intercontinental ballistic missile capabilities, the UK government maintains a different perspective. A British spokesperson told the BBC there is "no assessment" that Iran is attempting to target Europe with missiles, stating that the UK retains the military capability to defend against any external threat.
Economic fallout from the war is already being felt in domestic markets. In Mexico, investors are navigating rising inflation, which reached 4.59% in March, according to Expansión. While Cetes—Mexican Treasury certificates—are seeing reduced yields due to market volatility, they remain a primary hedge against the rising costs of fuel and food. Analysts suggest that even with lower returns, these government bonds provide a necessary shield for capital against the inflationary pressures exacerbated by the global energy shock.
Beyond Western markets, the human cost of the conflict continues to mount. US News & World Report projects that the sustained war could push as many as 30 million people into extreme poverty globally. With the current ceasefire set to expire in one week, the failure of previous peace talks has left international observers bracing for further volatility in energy and food markets.
