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'A Very Dark Picture': IMF Warns Trump's Iran War Could Unleash Global Recession
One expert called the new IMF forecast "extremely concerning for the global economy," noting that "the most dire impacts of our economic situation will be felt by the poor and the vulnerable."
Apr 14, 2026
The International Monetary Fund warned Tuesday that the US-Israeli war on Iran could slow global economic growth, stoke inflation, and increase the possibility of a worldwide recession and energy crisis.
The illegal war of choice on Iran being waged by US President Donald Trump and the government of fugitive Israeli Prime Minister Benjamin Netanyahu has already had wide-ranging negative impacts on the global economy, from soaring fuel prices caused by the closure of the Strait of Hormuz to supply chain disruptions and financial market volatility.
However, a major global economic crisis has thus far been averted. That could soon change.
"Despite major trade disruptions and policy uncertainty, last year ended on an upbeat note," International Monetary Fund director of research Pierre-Olivier Gourinchas wrote in an analysis of the IMF's latest World Economic Outlook report. "The private sector adapted to a changing business environment, while powerful offsets came from lower US tariffs than originally announced, some fiscal support, and favorable financial conditions coupled with strong productivity gains and a tech boom."
"Despite some downside risks, the momentum was expected to carry over into 2026, lifting the pre-conflict global growth forecast to 3.4%," Gourinchas continued. "War in the Middle East has halted this momentum. The closing of the Strait of Hormuz and serious damage to critical facilities in a region central to global hydrocarbon supply raise the prospect of a major energy crisis should hostilities continue."
The IMF said that even if the war ends quickly, lasting damage to the world's economy will still happen.
According to the IMF report:
Under the assumption of a limited conflict, global growth is projected at 3.1% in 2026 and 3.2% in 2027, below recent outcomes and well under pre-pandemic averages. Global inflation is expected to tick up in 2026 and resume its decline in 2027. Pressures are concentrated in emerging market and developing economies, especially commodity importers with preexisting vulnerabilities. Risks are decisively on the downside. A prolonged conflict, deeper geopolitical fragmentation, disappointment over [artificial intelligence]-driven productivity, or renewed trade tensions could weaken growth and unsettle markets. High public debt and eroded policy buffers add vulnerability. Policies should foster adaptability, enhance credibility, and reinforce international cooperation.
The IMF said that "the shock’s ultimate magnitude will depend on the conflict’s duration and scale—and how quickly energy production and shipment normalize once hostilities end," and that effects will vary by location.
"Countries will feel the impact differently," Gourinchas wrote. "As in past commodity-price surges, importers are highly exposed. Low-income and developing economies—especially those with vulnerabilities and limited buffers—are likely to be hit hardest. Gulf energy exporters will face economic fallout from damaged infrastructure, production disruptions, export constraints, and weaker tourism and business activity. Remittances will fall in countries that supply migrant workers to the region."
Eric LeCompte, executive director of the religious development group Jubilee USA Network and a United Nations finance expert, called the new IMF forecast "extremely concerning for the global economy," lamenting that "the most dire impacts of our economic situation will be felt by the poor and the vulnerable."
The new report comes as the IMF's annual Spring Meetings are underway in Washington, DC.
“World leaders coming to Washington are receiving a very dark picture of the global economy,” said LeCompte. “The war is causing greater poverty and increases in our fuel and food costs."
Other groups have also warned of the adverse economic effects of the US-Israeli war on Iran.
Ben May, Bridget Payne, and Paul Moroz of Oxford Economics recently published a report warning that a longer war in Iran "could tip the global economy into recession."
In such a situation, "the Gulf states suffer most acutely—GDP down over 8% in 2026—before rebounding sharply as production recovers," they wrote. "Advanced Asian economies, which are especially reliant on Gulf oil, take a heavy blow from energy import cost surges and supply chain disruption."
"Europe faces a painful squeeze on gas and electricity," the trio added. "The US fares somewhat better given its domestic energy production, but an equity market decline of nearly 20% weighs heavily on consumer spending."
Some US-based organizations have focused on the war's domestic economic impacts.
Dean Baker, a senior fellow at the Center for Economic Policy Research, published an analysis earlier this month asserting that "making enemies makes us poorer."
"Secretary of Defense (or War) Pete Hegseth seems to be having a really great time killing people in Iran, but his live action video games come at a big cost—not just in lives, but in budget dollars," Baker wrote. "To be clear, the main reason to oppose this pointless war is its impact on the people of Iran and elsewhere in the region. But it also has a huge economic cost that is seriously underappreciated."
"In addition to reducing our security and jeopardizing the well-being of people around the world, Donald Trump’s belligerence will cost us a huge amount of money," he said. Focusing on US military spending, Baker noted that "Trump wants the country to spend 5% of GDP, or $1.5 trillion a year, on the military. This comes to $12,000 per household."
Trump and his Republican Party are seeking to offset some of their record military spending with devastating cuts to social programs upon which tens of millions of Americans rely. Already reeling from the biggest cuts to Medicaid and Supplemental Nutrition Assistance Program spending in those programs' histories, Trump’s budget request for fiscal year 2027 contains $73 billion in total reductions in nondefense spending.
"It is striking to see that Congress might be willing to quickly cough up this money," said Baker, referring to military funding, "when it has refused far smaller sums that could have made a huge difference in the lives of tens of millions of people."
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How the Iran War Could Lead to a Crash Worse Than 2008
It’s too late to prevent the inflation of an AI bubble or to advise against a US attack on Tehran. At this point, the most we can do is to hope for a quick end to the war and for some improvisational brilliance among the world’s leaders of government and finance.
Mar 21, 2026
Several commentators have remarked that the United States’ war on Iran carries echoes of 2008. I’ll argue here that a potential financial crash this year could actually be much worse.
The Global Financial Crisis (GFC) of 2008 was the biggest economic crunch since the Great Depression. Unemployment surged, topping 10% in the US. Global stocks lost trillions of dollars in value. Major brokerage houses collapsed. The US auto industry only survived thanks to enormous government bailouts. How could another crash top that?
Consider the causes. The 2008 Great Recession resulted from a confluence of three factors:
- Failed US wars in the Middle East, in that instance against Iraq and Afghanistan. Many economists argue the Iraq and Afghanistan Wars contributed to the GFC by fueling massive American budget deficits and worsening trade imbalances, and by creating a “capital flow bonanza” that triggered the US credit boom. While not the sole cause, the war compounded the vulnerability of the US economy.
- Soaring oil prices, following the plateauing of world conventional oil production in 2005. Oil demand continued to rise but the global supply of oil did not follow suit. On July 11, 2008, crude prices hit $147 per barrel, their all-time high. Since the economy runs on energy and oil is the world’s most important energy source, oil prices have a way of impacting all industries. Financial markets crashed three months after the oil-price peak.
- A bursting financial bubble inflated by subprime mortgages in the US and financial derivatives traded worldwide. The mortgage bubble involved $1.3 trillion to $1.5 trillion in high-risk loans issued during the 2000-2006 housing boom. It was a house of cards waiting to tumble.
The resulting unwinding of debt and derivatives came within a hair’s breadth of turning into a massive bank run and general economic collapse. Governments (led by the US) bailed out industries and banks, lowered interest rates to zero, purchased large tranches of financial securities, and instituted enormous fiscal stimulus programs and tax cuts. Even with these rapid and maximum-scale efforts totaling hundreds of billions of dollars, the GFC led to widespread housing foreclosures, a near-40% downturn in the S&P 500, and a substantial increase in the poverty rate.
Now consider the following:
- Today’s AI financial bubble is four times bigger than the subprime mortgage bubble of 2008 and 17 times bigger than the dot-com bubble of 2000.
- The Iran war, though so far not involving US ground troops, could possibly end up being more problematic than the Iraq invasion of 2003, if only from the standpoint of flows of energy and international trade. The war is likely to result in real oil shortages and prices potentially even higher than those seen in 2008. Additionally, more of the Middle East is now involved in hostilities, and oil and gas production and shipment infrastructure is being damaged or destroyed, thereby undermining the long-term economic prospects of the region, as well as destabilizing its politics. No one knows how this will end.
- For the US economy, warning signs were already flashing before the war: Stubbornly high inflation, a bad jobs picture, and worsening consumer sentiment were indicators of a looming recession.
- The final factor can be stated as a question: Would today’s US Treasury head be as successful at averting financial doom as was Henry Paulson in 2008? Then, the US was able to enlist government and business leaders from the world’s key countries in cooperating to fashion a collective survival strategy. Would current US Treasury Secretary Scott Bessent have similar success, given the recent global collapse of trust in US leadership?
In view of the possibly catastrophic consequences of the attack on Iran, many people wonder what motives could have justified it. Logan McMillen argues in Foreign Policy in Focus that the so-called “Donroe Doctrine” intends to freeze China out of the Western Hemisphere and to deprive it of cheap energy:
The strategy is entirely zero-sum. By turning the Middle East and the Caribbean into militarized chokepoints, the United States is suffocating China’s independent oil supply lines, starving its industrial capacity while guaranteeing temporary windfall profits for Western supermajors. Concurrently, from the lithium flats of Bolivia to the ports of Peru, Washington is deploying right-wing proxies and military coercion to systematically dispossess Chinese capital in Latin America, re-colonizing the Andes to secure the supply chains of the 21st century.
Other commentators see the war as being spearheaded by members of the Christian Zionist movement, which desires a fulfillment of biblical prophecies of the battle of Armageddon and the return of Jesus.
Even if McMillen’s analysis is sound and there is an arguably rational motive behind the war, that doesn’t mean the campaign will go according to plan or that it will achieve its aims. Many analysts see it already careening off the rails.
It’s too late to prevent the inflation of an AI bubble or to advise against a US attack on Tehran. At this point, the most we can do is to hope for a quick end to the war and for some improvisational brilliance among the world’s leaders of government and finance.
Meanwhile, it would be smart to make whatever preparations you can. For folks in the Northern Hemisphere, it’s time to start planning this spring’s food garden. You might want to plant a few more rows of beans than you do most years, so you have enough to share with neighbors.
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When Will the Contented Class Revolt Against Trump?
When will these contented ones collectively start saying, “Enough is enough” and it’s time to say to Donald Trump, “You’re Fired”?
Nov 16, 2025
The reason the famous and prolific Harvard economist, John Kenneth Galbraith, is often referred to as a political economist can be seen in the continuing relevance of his book The Culture of Contentment (1992). His thesis explains in significant part why President Donald Trump’s wrecking of America has not more significantly collapsed his support, now below 39% approval.
In the US, the contented classes hail from both parties. They are not a majority of the population by any means, given that half of all Americans are “poor” or “near poor.” They are a majority of the politically and economically influential people who support policies that maintain their comfort at the expense of the necessities of the “functional underclass” left behind in poverty. The contented classes include the super rich, of course, but also the managerial, professional, and wealthier working classes. In addition, they vote at a higher percentage than the poor.
Before Trump, this contented class, which includes members of Congress, was doing well, so much so that they stood in the way of increasing the federal minimum wage, frozen at $7.25 per hour, or increasing Social Security benefits, frozen for over 40 years. These changes could have been paid for by hiking Social Security taxes on, you guessed it, the contented classes. Despite public opinion polls favoring expanding the social safety net, the contented class wants the status quo of no paid sick leave, no paid family or maternal leave, no subsidized childcare, and no universal paid vacations. Western European countries all have a more robust social safety net than the US.
When you crank in the damage done by Trump and his Trumpsters in Washington, DC, members of the contented classes are largely unaffected. The costs of universally damaging programs cutting preparedness for climate violence, pandemics, huge expansions in the police state against immigrants, and the military-industrial complex are not felt where the contented classes live, work, and raise their families.
Trump’s tyrannies and treacheries; his open flouting of the laws (the establishment likes such flouting to be discreet); and his revolting, foul-mouthed defamations tower over Richard Nixon’s transgressions.
We can make a list of the terrible closedowns or strip-mining of federal agencies’ law enforcement and regulatory initiatives. Very few exclusively impact the contented classes. Some may actually benefit.
Other Trump moves, many of them illegal and unauthorized by Congress, delight these people. They support lower taxes on upper-income people and businesses, large or small. The Internal Revenue Service is now going further with its unauthorized dilutions of the 15% minimum tax on corporate profits. The rising stock market adds to the complacency of the contented classes.
The most cruel and vicious actions by Trump—abolishing the US Agency for International Development, medical, water, food assistance to desperate millions abroad—cuts to Meals on Wheels, Head Start, Medicaid, Supplemental Nutrition Assistance Program (SNAP) impact the masses—tens of millions of them directly and daily. They do not reach the contented class members of our population.
This is not to say that millions of these contented persons do not care what is happening to their fellow citizens. But normative caring is not viscerally feeling the pain and suffering, the anxiety, dread, and fear of losing healthcare coverage; tomorrow’s meal; the brunt of chronic indebtedness; or abandoning the disabled, the sick, and the casualties of the workplace.
Galbraith wrote that living in their contented culture leads to short-term thinking, underinvestment in public goods, and ignoring the widening inequality between the “haves” and the “have-nots.” Inequality also stems from making money from money—a source of wealth denied to people living paycheck to paycheck.
The capture of the Democratic Party by this complacent class has become so pronounced that the blue-collar working-class members have broken away from their unions and parents or grandparents’ devotion to the FDR-like New Deal politics and fallen prey to the rhetorical seduction of the corporatist GOP.
What could Trump do to alienate large portions of this contented class, which Galbraith argues has been the only force that can disrupt the status quo? When will these contented ones collectively start saying, “Enough is enough” and it’s time to say to Donald Trump, “You’re Fired”?
When the following come together—serious recession, serious inflation, with destabilizing (to their businesses) tariff-driven surging prices; a reckless foreign war quagmire; plunging stock markets; daily spreading chaos; and the media-exposed sickening stench of raw corruption flowing from the White House throughout the upper realms of the executive branch—the contented classes should join the resistance to the Trump madness.
Back in 1974, the Republican establishment decided it was time for Richard Nixon to go, despite his having won reelection in 49 of 50 states in 1972, with a 60% approval in the polls. He was not considered “useful” to the power brokers anymore.
Trump’s tyrannies and treacheries; his open flouting of the laws (the establishment likes such flouting to be discreet); and his revolting, foul-mouthed defamations tower over Richard Nixon’s transgressions.
History instructs that latent revulsions and fears by the power elites are often launched onto the public stage by some specific outrage, decadence, or bullying. Stay tuned. With Dictator Donald (he regularly intones, “This is only the beginning”), THE WORST IS YET TO COME.
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