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

US Treasury Secretary: Economic Sacrifice for Nuclear Security

Scott Bessent, the U.S. Treasury Secretary, argued to the BBC that a “modest economic cost” would be justified to neutralize the risk of Iranian nuclear attacks on major Western cities. Amid concerns that the U.S.-Israel conflict with Iran might push the global economy into recession, Bessent prioritized long-term safety over short-term economic impacts.

He questioned the potential GDP impact if a nuclear strike were to reach London, emphasizing his focus on enduring security over immediate economic forecasts. “I am less worried about temporary setbacks than the threat Iran poses to international stability,” he stated.

Iran has maintained its nuclear initiatives are peaceful, while a UK official noted there was “no evidence” of Iran targeting Europe with ballistic missiles. Bessent highlighted that the conflict had clarified Iran’s capability to strike distant locations, including London, with mid-range intercontinental missiles.

IMF Warns of Global Economic Uncertainty

The IMF highlighted that a prolonged Middle Eastern war could derail global economic growth, projecting a potential drop below 2% in 2026 under extreme conditions. Such a scenario would mark a near-recession, a rare occurrence since 1980, last seen during the pandemic.

“In the worst case, soaring oil, gas, and food prices could send global growth plummeting,” said the IMF. The report also warned that a conflict extending beyond the current year could lead to inflation nearing 6%, forcing central banks to raise interest rates.

Energy prices have surged since the Iran conflict began, following the closure of the Strait of Hormuz and stalled peace talks. While oil prices briefly approached $120, they have since retreated to $95 per barrel. The IMF stressed that a recession risk would escalate if energy costs remained high for two consecutive years.

The UK is expected to suffer the most from the energy shock, with its growth forecast slashed to 0.8% this year from 1.3%. However, the country is projected to rebound to 1.3% growth in 2027 if the war concludes swiftly. Gulf oil-exporting nations face similar challenges, with Iran’s economy anticipated to contract by 6.1% this year.

IMF chief economist Pierre-Olivier Gourinchas cautioned that a prolonged war would cause inflation to spiral, increase unemployment, and threaten food supplies in certain regions. Even if the conflict ended immediately, he warned the oil supply disruption would mirror the 1970s crisis, though current reliance on fossil fuels is lower, easing consumer effects.

With the U.S. imposing a blockade on Iranian ports, the situation remains volatile. The IMF’s outlook underscores the need for rapid resolution to stabilize global growth, which could ease to 3.1% in 2026 if energy markets normalize by mid-year. This adjustment, however, leaves the world still vulnerable to economic shocks from the ongoing tensions.