The wars in Iran and Ukraine are kicking up into high gear again, but the biggest crisis may be the looming global economic collapse. After the escalating attacks and counter-attacks in the Strait of Hormuz over the last couple of days, and Trump’s cavalier comment today about negotiations with Iran being “ over,” oil prices rose by more than 10% over July 7-8, and the stock market fell by more than 2% over those two days.
But markets are the least of it. If the Strait of Hormuz remains shut to oil trade, then the 20% cut in world supplies that it entails—which is now working its way through the system as pre-existing reserves are being exhausted—will shortly hit the world physical economy like a shock wave.
In terms of the (flawed) monetary accounting of the world economy measured by GDP, the IMF just issued a downgrade for its World Economic Outlook, forecasting a “sluggish” 3% GDP growth rate for the world for 2026. Even that assumes that the Strait of Hormuz will be reopened later this month—which is far from guaranteed. Inflation, they warn, will hit 4.7% for the year.
The two largest countries in the world in terms of population are expected to do far better than the average, according to the IMF. China will grow by 4.6% and India will grow by 6.4%, according to a report by PBS.
