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.

Europe has the added pain of having to increase defense spending because of the Ukraine war and Trump’s repeated threats to withdraw from NATO.

Ironically, the countries that one would expect to be worst hit—the Gulf oil producers—appear to be best-equipped to weather the storm. Qatari Finance Minister Ali Ahmed al-Kuwari told the IMF that Qatar could “ride it out for a year.”  He added that the rest of the world would suffer. “A full-fledged impact is coming,” he said, “and it is not far away.”

The reason for the Gulf countries insouciance is their massive sovereign wealth funds which have grown to immense levels with the help of half a century of oil money. In total Saudi Arabia, Qatar, the UAE, Kuwait and Bahrain have an estimated $4.1 trillion financial cushion.

That it is not to say that the Gulf countries will not escape entirely. To start with there is the damage that Iranian drones and missiles have wrought on oil and gas installations. But perhaps more important is the damage that the war has brought to the region’s reputation as an international hub for tourism, finance and trade. Seventy-two million tourists visited the Gulf countries in 2024 and spent $102.2 billion—ten percent of the region’s GDP. Those same tourists are unlikely to want to holiday in a war zone.

Unlikely to want to take their families to live in the region are the four million Europeans and Americans who hold the main managerial positions and are key to the region’s economic success.

Of course, the key country is the United States. It is the Americans who elected an erratic president who started the war. It is only Americans who can stop him.

The American love of affair with the automobile means that a crucial factor in their thinking is the price of petrol (or, if you prefer, gas). The price of a gallon of petrol at the pump has risen an average of $1.00, or about 36 percent since the start of Trump’s War. Most economists believe petrol prices will remain high until after the all-important midterm elections in six months’ time.

The growing unpopularity of the war and that of Donald Trump and the Republican Party, means that the Democrats will win control of the House of Representatives and may also win a majority of the Senate. The Democrats have already tried to vote an end to the war. They were blocked by the Republican majority. Come six months that could change. But what will be the state of the world economy after six months of a blockade of the Strait of Hormuz or, even worse, an escalation of Trump’s War?

* Tom Arms is foreign editor of Liberal Democrat Voice. He also contributes to “The New World” magazine and lectures on world affairs. He is the author of “America Made in Britain,” two editions of “The Encyclopaedia of the Cold War” and “The Falklands Crisis.”