US Treasury secretary tells BBC ‘bit of pain’ worth long-term security

US Treasury Secretary Tells BBC ‘Bit of Pain’ Worth Long-Term Security

Scott Bessent, the US Treasury Secretary, shared with the BBC that a “modest economic setback” is necessary to mitigate the danger of Iranian nuclear strikes on Western cities. Amid warnings from the International Monetary Fund (IMF) that the ongoing US-Israel conflict with Iran could trigger a global economic slowdown, Bessent emphasized that the long-term gains in security would justify the short-term costs.

IMF Warns of Recession Risk

The IMF highlighted that in a worst-case scenario—where oil, gas, and food prices remain elevated for two consecutive years—global growth could dip below 2% in 2026. This projection suggests a potential global recession, a phenomenon that has occurred only four times since 1980, including during the recent pandemic.

“I wonder what the hit to global GDP would be if a nuclear weapon hit London… I am less concerned about short-term forecasts, for long-term security,” Bessent stated.

Despite the economic concerns, Bessent argued that US and Israeli military actions have reduced the “tail risk” of Iranian nuclear strikes against Western nations. He cited the Iranian missile tests at Diego Garcia as evidence of their capability to target London.

Iran’s Peaceful Nuclear Claims

Iran maintains its nuclear program is solely for peaceful purposes. Meanwhile, the UK government clarified there was “no assessment” Iran aimed to strike Europe with missiles, though it affirmed its readiness to defend the country from any threats.

Impact of the Conflict on Global Markets

IMF chief economist Pierre-Olivier Gourinchas warned that prolonged conflict could drive inflation, increase unemployment, and cause food shortages in certain regions. Even a swift resolution, he noted, would still have a significant effect on oil supply, comparable to the 1970s oil crisis. However, he added that the world’s reduced reliance on fossil fuels would lessen the impact on consumers.

Energy prices have fluctuated since the war began over six weeks ago, following the closure of the Strait of Hormuz and stalled peace talks. While oil costs rose near $120 during the conflict, they have since retreated to around $95 per barrel.

Regional Economic Forecasts

The IMF forecast that the UK would face the most severe economic repercussions from the energy shock linked to the Iran war, lowering its growth estimate for this year to 0.8% from 1.3%. It expects a recovery with 1.3% expansion next year. Meanwhile, Gulf oil-exporting nations are anticipated to experience a sharp slowdown or contraction in growth this year.

Iran’s economy is projected to shrink by 6.1% this year, though a 3.2% rebound is forecast for 2027 if the conflict ends soon. This outcome remains uncertain.

Trump’s Blockade Announcement

On Sunday, US President Donald Trump declared a blockade of Iranian ports, signaling a further escalation in tensions. The move underscores the ongoing geopolitical stakes and potential for prolonged economic disruption.