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

US Treasury Secretary Advocates for Economic Sacrifices to Secure Long-Term Stability

Scott Bessent, the U.S. Treasury Secretary, stated during an interview with the BBC that the economic consequences of the U.S.-Israel-Iran conflict were a necessary cost to address the looming threat of Iranian nuclear strikes on Western capitals. While the International Monetary Fund (IMF) raised concerns that the war could push the global economy into a recession, Bessent emphasized that the long-term security gains would outweigh short-term economic setbacks.

IMF Economic Outlook

The IMF highlighted in its World Economic Outlook that a worst-case scenario—marked by sustained spikes in oil, gas, and food prices over two consecutive years—could reduce global growth to below 2% in 2026. This would place the world on the brink of a recession, a phenomenon that has occurred only four times since 1980, with the most recent instance being the pandemic-induced downturn.

“I wonder what the hit to global GDP would be if a nuclear weapon hit London… I am saying that I am less concerned about short-term forecasts, for long-term security,” Bessent remarked.

Bessent argued that the recent strikes had eliminated the “tail risk” of Iranian nuclear attacks on Western countries, providing clarity about the threat. He noted that Iran’s actions, including targeting the U.S. base at Diego Garcia, demonstrated their possession of mid-range intercontinental ballistic missiles capable of reaching London. “Now we know for a fact that they have the means to strike and that they want a nuclear programme,” he added.

UK Government Response

A UK government spokesperson clarified that there was “no assessment” indicating Iran aimed to target Europe with missiles. They assured that Britain maintains the military capacity to defend against any potential attacks, both domestically and internationally. “We are ready to protect the country, regardless of the threat,” the statement said.

The IMF also projected that energy prices have risen nearly to $120 during the conflict but have since retreated, with a barrel of crude oil currently priced at $95. However, it warned that prolonged hostilities could amplify the recession risk, especially if energy production and exports from the Middle East remain disrupted beyond mid-2026.

“A prolonged conflict would lead to spiralling inflation, rise in unemployment, and food insecurity in some countries,” said IMF chief economist Pierre-Olivier Gourinchas.

Gourinchas noted that even if the war ended immediately, the impact on oil supply would mirror the 1970s crisis, when Arab producers imposed an embargo on the U.S. and allies. Yet, he acknowledged that modern economies are less reliant on fossil fuels, thus mitigating consumer hardship.

IMF forecasts indicate the UK will be most vulnerable to the energy shock, with growth revised down to 0.8% for 2026 from an earlier estimate of 1.3%. However, the country is expected to rebound with 1.3% expansion in the following year. Meanwhile, Gulf oil-exporting nations may face sharp economic declines, while Iran’s economy is projected to shrink by 6.1% this year, contingent on a swift resolution to the conflict.