The Iran War’s Global Economic Impact

Welcome to the Daily News Brief, CFR’s flagship morning newsletter summarizing the top global news and analysis of the day. 

Top of the Agenda

The Iran war’s ramifications for the world economy are in focus after a week of heightened attacks on energy infrastructure. The World Trade Organization (WTO) said yesterday that if oil and gas prices remain high for the rest of the year, it could reduce the forecasted 2026 growth in global GDP by 0.3 percent. As countries weigh how to ease the energy shock, U.S. Treasury Secretary Scott Bessent said yesterday that Washington would consider removing sanctions on some Iranian oil, even as the Wall Street Journal reported that U.S. attack jets and helicopters were targeting Iranian assets in the area of the Strait of Hormuz. Seven U.S. allies pledged to help ensure safe passage through the strait, but did not specify how they would do so.

Projections on economic costs. Some world regions would be hit harder economically by an extended war, the WTO said. It estimated Europe, a heavy energy importer, could see GDP grow at least one percent less than previously expected. A Goldman Sachs economist forecast earlier this week that if the war continues through the end of April it could shrink Kuwait and Qatar’s GDP by 14 percent this year and Saudi Arabia and the United Arab Emirates’ by around 3 and 5 percent, respectively. Those projections preceded an Iranian strike on a major Qatari gas facility this week that knocked out around 17 percent of the country’s liquified natural gas export capacity, the country’s energy minister told Reuters. 

Signals on war length. In separate comments yesterday, U.S. President Donald Trump and Israeli Prime Minister Benjamin Netanyahu said the United States and Israel were accomplishing their battlefield goals. Both hailed their attacks on Iran’s military infrastructure, while Netanyahu said Israel also sought to create the conditions in Iran for a popular uprising. Iran’s leaders have pledged to keep fighting. Yesterday, Iranian Foreign Minister Abbas Araghchi wrote on social media that any agreement to end the war must compensate Iran for the destruction of civilian sites.

“From a very purely, narrow, sort of tactical military perspective, I think the war has been very successful. I think the difficulty lies in trying to translate those very narrow tactical military gains into some kind of larger strategic outcome. And it’s far from clear that the administration has any roadmap for how to get from here to there.”

—CFR expert Max Boot, The President’s Inbox

Across the Globe

Takaichi’s White House visit. Trump and Japanese Prime Minister Takaichi Sanae exchanged praise during Takaichi’s first White House visit yesterday, though Trump criticized Japan earlier in the week for refusing to send military assets to help unblock the Strait of Hormuz. Takaichi told reporters she had explained to Trump the constitutional limits on Japan’s use of force overseas. Japanese firms will invest up to $73 billion in U.S. nuclear and natural gas facilities as part of a trade and investment deal reached last year, the White House said.  

U.S. arms sales to Mideast. The State Department announced yesterday it had approved more than $16 billion in potential arms sales to Jordan, Kuwait, and the United Arab Emirates. Citing emergency circumstances, it waived the normal requirement for Congress to review the sales. All three countries have been attacked by Iran this month in the ongoing war. 

Military planning on Greenland. In response to Trump’s repeated threats to acquire Greenland, Danish troops were deployed in January to the territory with blood supplies and explosives to destroy airport runways in case of a U.S. invasion, Danish public broadcaster DR reported. It cited unnamed Danish, French, and German officials. U.S.-Denmark tensions have since abated and are being handled through negotiations. 

Belarus prisoner release. Belarus agreed yesterday to free two hundred and fifty political prisoners as part of a deal with the United States that would lift sanctions on three Belarussian companies that export a key fertilizer ingredient. The near-closure of the Strait of Hormuz has caused a global fertilizer supply crunch. The United States, which heavily sanctioned Belarus for supporting Russia’s war in Ukraine, has increased its diplomatic engagement with the country in the last two years.

UK foreign aid cuts. The UK government announced plans to cut the amount of direct foreign aid it provides to Middle Eastern and African countries by more than 50 percent over a four-year period. The budget cuts are meant to offset a boost in military spending. The Center for Global Development said that the UK’s overall foreign aid cuts are now proportionally deeper than those in the United States.    

Hungary, Slovakia block Ukraine aid. At a European Council summit yesterday, Hungary and Slovakia blocked a more than $100 billion loan for Ukraine. They cited a dispute over a damaged Ukrainian pipeline that normally transports Russian oil to Central Europe—even though Ukraine said this week it would fix the pipeline. German Chancellor Friedrich Merz called Hungary’s opposition “a gross act of disloyalty.”

Thailand’s PM reelected. Prime Minister Anutin Charnvirakul, a conservative loyal to Thailand’s monarchy, was overwhelmingly reelected yesterday. Anutin’s party gained parliamentary seats in last month’s snap election, which Anutin had ordered amid a border war with Cambodia and an upsurge in nationalist sentiment. He is the first prime minister to be reelected in twenty years. 

Chad’s reinforcements in Haiti. Chad will send eight hundred members of its security forces to Haiti this year as part of an international force to combat violence in the country, an unnamed Chadian police official told Reuters. The UN Security Council approved the mission last year, though full details of its composition have yet to be publicly confirmed. Some Kenyan officers from the current, smaller Kenyan-led mission in Haiti returned to Nairobi earlier this week.

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