Get Ready for Warflation
How the US–Israel war on Iran is about to push up prices, crash growth, and deepen the global cost-of-living crisis.
I wrote on Friday that this war was going to cause chaos to the global economy, and that markets were drastically underestimating its likely impact. Investors would, I predicted, realise their error soon enough – at which point, oil prices would skyrocket, stock markets would continue to slide, and growth expectations would stall.
Over the weekend, these predictions have come to fruition. Trump’s comments that the war would not end without Iran’s “unconditional surrender”, combined with warnings from Qatar’s energy minister that the conflict would have a significant and lasting impact on global energy supply, gave investors a wakeup call. The US and Israel – supported by servile allies like the UK – are at war in the Middle East. And it’s not going to end any time soon.
From the moment the first strikes were launched, this outcome was predictable to anyone paying attention. Under pressure from his declining poll ratings, a military-industrial complex frothing for war, and a genocidal Israeli leader who requires constant war to survive, Trump was never going to back down until he could declare total victory in Iran.
At the same time, a report by the National Intelligence Council seen by US and Israeli officials before the war started found that even a large-scale military assault would be unlikely to topple the Iranian regime. In other words, Trump and Netanyahu knew that this war was going to last for much more than just a few days. Both seemed to have pinned their political survival on its outcome.
But even if the US ‘wins’ this war – whatever that might look like – ordinary Americans – and Iranians, and Europeans, and pretty much everyone else – will continue to lose.
Here’s what’s likely to happen over the coming weeks:
Oil prices will continue to rise. Goldman Sachs is now predicting that oil prices are likely to exceed their 2022 and 2008 peaks. Prices could hit $150 per barrel, as the Qatari energy minister warned on Friday. If the conflict proves even longer-lasting, the FT warned that oil prices could hit $200 per barrel
