Iran’s Nuclear Ambitions and Regional Tensions

Bessent said the US-Israel war with Iran is aimed at eliminating the threat of Iranian nuclear strikes on Western capitals, according to the BBC. He questioned what the hit to global GDP would be if a nuclear weapon hit London, saying he is less concerned about short-term forecasts for long-term security.

At the start of the war. Iran had uranium enriched to 60%. According to senior US officials; However, Iran does not currently possess nuclear weapons, according to the BBC — the UK government has stated there is ‘no assessment’ that Iran is trying to target Europe with missiles.

Bessent told the BBC he is less concerned about the economic hit than the risk Iran poses to global security. He said the biggest risk is one you don’t know you were taking, adding that the Iranians have mid-range intercontinental ballistic missiles that could reach London and want a nuclear programme.

Bessent added that US and Israeli strikes have removed the ‘tail risk’ of Iranian nuclear strikes against Western countries, according to the BBC. A UK government spokesperson said there is no assessment Iran is trying to target Europe with missiles, but the UK has the military capability to keep Britain safe from any kind of attacks, whether on its soil or from abroad.

Global Economic Outlook and Recession Risks

In its World Economic Outlook report. The International Monetary Fund (IMF) warned that in a worst-case scenario where oil, gas, and food prices spike and remain high this year and next, global growth could fall below 2% in 2026. This would mean a close call for a global recession, which has happened only four times since 1980, according to the IMF.

Energy prices have soared since the war began more than six weeks ago after the key Strait of Hormuz shipping route effectively closed and peace talks between the US and Iran failed, according to the BBC. The IMF said the global economy is threatened with being thrown off course this time by the outbreak of war in the Middle East at the end of February 2026.

The IMF said the most severe conditions that could lead to a worldwide slowdown would include oil prices reaching an average of $110 per barrel this year and hitting $125 in 2027. Based on these assumptions. Inflation could reach as much as 6% next year, which could force central banks to increase interest rates to slow the pace of price rises.

IMF chief economist Pierre-Olivier Gourinchas told the BBC that a prolonged conflict would lead to spiralling inflation, push up unemployment, and lead to food insecurity in some countries. He warned that even if the conflict ended today, the impact on oil supply would be as big as the fallout from the 1970s oil crisis when Arab oil producers placed an embargo on the US and other countries which backed Israel during the Yom Kippur war.

Gourinchas said the world is now less dependent on oil and fossil fuels, so the impact on consumers would be less severe — However, he noted that the risk of recession would increase only if severe conditions continued over two years.

Economic Impacts on Key Regions and Countries

The IMF said if the conflict is resolved in the next few weeks and if energy production and exports from the Middle East begin to normalise by the middle of this year, global growth would ease to 3.1% for 2026. This is below an earlier forecast of 3.3%; it also left its prediction for global growth next year unchanged at 3.2%.

The IMF cut its estimate for UK growth this year to 0.8%, from a previous prediction of 1.3%. However, it expects the UK to recover with economic expansion of 1.3% next year. Oil exporting nations in the Gulf are likely to see a sharp slowdown in economic growth or even a contraction this year, according to IMF forecasts.

However, it forecasts a rebound of 3.2% in 2027, providing the war ends in the next few weeks. The IMF estimates that Iran’s economy will shrink by 6.1% this year. That is far from certain. On Sunday, US President Donald Trump announced a US blockade of Iranian ports to stop exports.

Some countries such as Qatar, a major supplier of liquefied natural gas (LNG), have been targeted with missiles and drones by Iran. Qatar’s Ras Laffan, the world’s largest LNG refinery, has been struck and is not expected to be fully operational for some time. The IMF forecasts that Qatar’s economy will contract by 8.6% in 2026 before bouncing back with 8.6% growth next year.

The IMF also predicts that Iran’s neighbour, Iraq, will take an economic hit this year from the war, with a slowdown of 6.8%. But it is expected to recover to 11.3% growth in 2027. A country’s economic resilience will depend on a number of factors, including the damage to energy infrastructure, dependence on the Strait of Hormuz, and availability of alternative export routes.

Saudi Arabia, for example, has its East-West pipeline which runs from the Persian Gulf to the Red Sea and can pump up to 7 million barrels of oil per day. Saudi’s growth will slow in 2026 but the economy is still expected to expand by 3.1%, and is projected to grow by 4.5% next year.

The IMF said most Middle East oil exporters are forecast for an upturn next year based on the assumption that energy production and transportation are normalized over the next few months. However, it cautioned that this assumption may need to be revised if the duration of the conflict extends and the degree of damage suffered gets reassessed.

The IMF also cut its expectations for China’s economic growth this year, predicting it will grow by 4.4% in 2026, down from the 4.5% increase it had forecast in January. Its projection that China’s economy will grow by 4% in 2027 was unchanged.

One country that has benefited from the surge in oil prices is Russia, according to IMF forecasts. The Russian economy is expected to grow by 1.1% this year and next, ahead of previous predictions of 0.8% and 1% respectively. Russia had been hit by a series of sanctions after it launched a full-scale invasion of Ukraine more than four years ago.

In March, Trump removed restrictions on exports of Russian oil as global prices soared. He also temporarily lifted sanctions on 140 million barrels of Iranian oil for 30 days. The European Commissioner for finance has warned against countries easing sanctions against Russia, arguing the country is ’emerging as a winner from this war.’

Energy prices are up, and that gives additional revenues for Russia’s war machine, Valdis Dombrovskis told an event on the sidelines of the IMF summit in Washington. ‘Now is not the time to ease the pressure on Russia.’