IF Donald Trump’s deadline for Iran passes without a deal tonight it “risks exposing deeper structural weaknesses in both the global and UK economies”, experts have warned.
The US President has said the new round of missile strikes against Iran will be devastating.
They will begin at 8pm Washington DC time on Tuesday (1am BST on Wednesday). Within four hours, every bridge and power plant in the nation will be “decimated” and “very little is off-limits”, Trump said.
To avoid this fate, according to the president, Iran has to make a deal “that’s acceptable to me”, including “free traffic of oil” through the Strait of Hormuz.
But experts fear that Iran will not heed Trump’s call, and it could be devastating for the global economy.
Not a short-term shock
Anita Wright, Chartered Financial Planner at Ribble Wealth Management, said this is not a short-term shock.
She added: “If a deal is not struck and tensions escalate, this is not just an oil story, it is a system stress event. Energy is fundamental to economic output. If supply through the Strait of Hormuz continues to be materially disrupted, you do not just get higher prices, you get lower real economic activity. That is the starting point. That shock feeds through financially.
“Higher oil prices keep inflation elevated, which in turn keeps interest rates and bond yields higher than markets are currently comfortable with. The combination is toxic: weaker growth alongside tighter financial conditions. Whether Iran holds all the cards, it is more nuanced than that, but in energy terms it has significant leverage.
“For the UK, that likely means renewed pressure on households through energy and imported costs, alongside persistently higher borrowing costs. In short, this is not a short-term shock that passes quickly, it risks exposing deeper structural weaknesses in both the global and UK economies.”
Daniel Wiltshire, Actuary & IFA at Bradford-on-Avon-based Wiltshire Wealth, said the “consequences will be real”.
He added: “Markets have become inoculated to Trump’s deadlines. Like a toddler on its tenth ‘final warning’, Iran may decide to call his bluff.
“But sooner or later he’ll have to follow through to retain credibility – and when he does, the consequences will be real, for both Iran and the global economy.”
The consequences will be real
Clive Bonny, MD at Strategic Management Partners, said the impact would be devastating.
He added: “If Trump escalates, Iran will deliver on their threat to attack desalination plants in the region.
“This will depopulate the region, cause mass migration to EU and other regions, cease all future production of 20% of global oil, spike oil prices to 200 dollars per barrel, increase all prices of all related supply chains and products, create long term global recession and boost the economies of Russia and China.”
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, said “fuel rationing” could be coming in the near-future for the UK.
He added: “The clock is ticking dangerously close to the midnight of this crisis, and the world economy teeters on a knife-edge as Trump’s deadline approaches. A US strike on Iranian infrastructure could send oil prices surging toward $200 per barrel, potentially triggering retaliatory mining of the Strait of Hormuz and cutting-off 20% of global oil and LNG supply, a move that would devastate the global economy, though at the cost of the Iranian regime itself.
“The UK faces the bleakest outlook among G7 nations with petrol and food prices spiking sharply, forcing the Bank of England to raise rates into an already stagnant economy. Even without further escalation, a global slide into stagflation and technical recession by quarter’s end appears likely.
“Britain’s fragile growth will almost certainly contract as energy-driven inflation erodes household spending. Fuel rationing and sustained market volatility lie ahead.”
Fuel rationing and sustained market volatility lie ahead
Rohit Parmar-Mistry, Founder at Burton-on-Trent-based Pattrn Data, said Trump is committing war crimes in his action in Iran.
He added: “If Trump continues with that course, the question stops being market reaction alone and becomes one of international law, accountability and political courage. If actions cross the line into collective punishment or unlawful military escalation, many people will see that as war crimes, not simply hard-nosed diplomacy.
“At that point, the real test is not just for Washington or Tehran, but for the rest of the world. Will allies keep repeating the same language about restraint while shielding the US and Israel from meaningful consequences, or will they finally treat them as states that can also act outside the rules?
“Markets would still react through oil, shipping and inflation, but the deeper damage would be to the credibility of the international order itself. If the message is that some powers can escalate with impunity while others are told to negotiate, that double standard will outlast any immediate economic shock.”
Photo by Mick Haupt on Unsplash.
