Trump’s War against Iran has upended the world economy. And it has only just begun. As one economist said: “At the moment things are bad. They are going to get worse and they could become catastrophic.”
At the International Monetary Fund’s (IMF) spring meeting of world finance ministers the IMF revised down world economic growth for 2026 from 3.3 percent to 3.1 percent. It then went on to warn that if the Iran War continued much longer there was a real risk of a global recession.
Of the world’s advanced economies, the UK is the hardest hit according to both the IMF and the Organisation for Economic Cooperation and Development (OECD). Predicted growth in the UK is 0.8 percent for 2026, down from 1.3 percent.
Even harder hit are the Asia Pacific countries who are dependent on the Persian Gulf for their gas and oil-based energy. Asia is also the most populous continent and accounts for more than half of global manufacturing which means that economic hits to that region have major global impact. The UN Development Programme (UNDP) reckons that the war has already cost Asia-Pacific countries $300 billion.
Fossil fuels are not the only vital commodity exported from the Persian Gulf. The region is the world’s major source of urea which is a derivative of natural gas and a major component of fertiliser. There is a real danger that the lack of fertiliser will hit global crop yields.
The UN Food and Agriculture Organisation (FAO) has warned that forty-five million people could be pushed into “food insecurity” and that food shortages could reach “catastrophic levels.”
The Eurozone has also been hit. IMF growth predictions for the Eurozone have been revised down from 1.3 percent to 1.1 percent and inflation is expected to go up from 2.1 percent to 2.6 percent. Trump’s war has made it unlikely that the European Central Bank can cut interest rates. In fact, they may have to raise them. This view is being echoed by central banks around the world.
Germany is the hardest hit of the Eurozone countries. This is because its economy is heavily geared towards manufacturing which in turn is fuelled by oil and gas. Because France derives a large part of its energy from nuclear power plants it will escape a lot of the pain, but the French finance minister has warned about inflation and supply chain risks.







it looks like a relatively gentle week in the Lords, although there will be an opportunity for the Lords to ask the Commons to think again… again… on the Victims and Courts Bill and the Crime and Policing Bill. Yes, it’s ping-pong time in the Lords…
I’ve been doing European politics with the Liberal Democrats on and off since 1989, long enough to know that it’s always worth waiting a little before declaring that a change of government is good news or not. Indeed, I’ve been around so long that I remember when FIDESZ were a welcome part of the liberal family – and Viktor Orban was its leader in those days too.
