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

US Treasury Secretary Says Economic Sacrifice Justifies Long-Term Security

Scott Bessent, the U.S. Treasury Secretary, asserted to the BBC that a “modest economic sacrifice” was necessary to avert the possibility of Iranian nuclear strikes on major Western cities. Amid warnings from the International Monetary Fund (IMF) that the conflict between the U.S. and Israel could trigger a global economic downturn, Bessent emphasized the value of long-term security over immediate economic concerns.

“I wonder what the impact on global GDP would be if a nuclear weapon struck London… I am more focused on the security implications than the short-term economic hit,” he stated.

Iran maintains its nuclear initiatives are purely peaceful, while the UK government has said there is “no evaluation” that Iran aims to target Europe with missiles. Bessent, however, highlighted the certainty of Iran’s missile capabilities, citing an attack on the U.S. base at Diego Garcia as evidence. He argued that the recent strikes had removed the “tail risk” of nuclear threats against Western nations.

The BBC previously noted that the probability of Iranian ballistic missiles reaching London remains low. Despite this, the UK’s spokesperson reiterated confidence in the country’s military readiness, asserting that Britain is prepared to defend itself against any potential attacks.

IMF’s Economic Outlook

In its World Economic Outlook, the IMF outlined a worst-case situation where oil, gas, and food prices remain elevated for the next two years, potentially causing global growth to drop below 2% by 2026. Such a scenario would bring the world close to a recession, a phenomenon that has occurred just four times since 1980, most recently during the pandemic.

Energy costs have surged since the conflict began over six weeks ago, driven by the closure of the key Strait of Hormuz shipping route and stalled peace negotiations. The IMF warned that ongoing hostilities could disrupt global economic stability, with the most severe consequences involving oil prices climbing to $110 per barrel this year and $125 in 2027.

Global Impact and Recovery Prospects

IMF chief economist Pierre-Olivier Gourinchas noted that prolonged conflict could lead to soaring inflation, rising unemployment, and food shortages in certain regions. Even if the war ended immediately, the effect on oil supply would mirror that of the 1970s embargo, though Gourinchas added that reduced reliance on fossil fuels would lessen consumer impact.

Currently, oil prices have dipped to $95 per barrel from a high near $120. However, the IMF warned that a two-year escalation in severe conditions would heighten recession risks. If the conflict resolves within weeks and Middle Eastern energy production stabilizes by mid-year, global growth could ease to 3.1% for 2026—lower than earlier projections of 3.3%—with 2027 growth forecast unchanged at 3.2%.

The UK is anticipated to suffer the most from the energy shock linked to the Iran war. The IMF revised its growth estimate for the country this year to 0.8%, down from 1.3%, but predicts a recovery to 1.3% in 2027. Meanwhile, Gulf oil-producing nations may experience significant growth declines or even economic contractions this year. Iran’s economy is projected to shrink by 6.1% this year, with a rebound of 3.2% expected in 2027, contingent on the war ending soon.

On Sunday, U.S. President Donald Trump declared a blockade on Iranian ports to further pressure the nation amid the escalating tensions.