President Donald Trump’s war on Iran poses a risk to trade around the world and could result in slower GDP growth as well as higher fertilizer costs, according to a new report from the World Trade Organization. The organization also warned that higher oil prices will harm the global economy and risks killing the recent boom in artificial intelligence technologies.
The warning came from WTO chief economist Robert Staiger at a press conference on Thursday, where he said, “If elevated energy prices persist for the rest of the year, we expect that growth in world GDP would fall from our baseline prediction of 2.8% in 2026 to 2.5% before recovering in 2027.”
The duration of the “conflict in the Middle East,” as Staiger called it, was the big unknown in their forecasts, and if higher energy prices persisted, it would weigh everything down—including the industry that seems to be keeping so much of the global economy afloat: AI.
The investment boom in AI-related goods and services was very good for the global economy last year, but Staiger told the Guardian, “If the price of energy continues to be elevated for the whole year, that could put a crimp on the AI boom.”
Staiger said that AI investments will suffer, “Because that investment is very concentrated in a number of very large firms, and the technology is still ultimately unproven in terms of how much it can deliver, there is a bit of uncertainty there in terms of where the future’s going.”
It’s an odd place for Trump to be, as a world leader who has tried to promote himself as a president who wants AI to flourish. But Trump’s erratic decisions have created an environment where it’s unclear what may be dominating his agenda from day to day. Trump hasn’t articulated a coherent reason for attacking Iran in a war that started Feb. 28 and has no end in sight.
Traffic through the Strait of Hormuz has effectively been shut down by Iran as it shoots missiles and drones at ships. And that’s a big problem for global energy prices when 20% of the world’s oil travels through the Strait.
The Trump regime is flailing in an effort to bring oil prices down, and Scott Bessent appeared on Fox Business to suggest they were about to lift sanctions on some Iranian oil in an effort to stabilize the market.
It’s not just oil. Israel bombed Iran’s South Pars gas field this week, which prompted Iran to hit Qatar’s Ras Laffan Industrial City on Wednesday, the largest liquefied natural gas facility in the world, where it sustained “extensive damage.” President Trump insisted the U.S. didn’t know Israel was going to target South Pars, something that seems to be untrue based on all available evidence. But Trump is clearly panicking, given the way that markets have been spooked by this tit-for-tat in the Middle East.
One energy expert who spoke with the Financial Times described the strike against Qatar’s Ras Laffan facility in dire terms: “This has always been my nightmare scenario, my Armageddon scenario, the one I didn’t want to happen.”
Europe and Asia are dependent on natural gas from the Middle East, and European natural gas prices skyrocketed 30% on Thursday, according to the New York Times. That’s on top of prices up 60% to 70% since the start of the war, and Belgian Prime Minister Bart De Wever said leaders in the EU were “very worried about the energy crisis,” according to CNN.
Brent crude oil briefly hit $119 a barrel on Thursday before dipping lower to $111, according to the Wall Street Journal. The current national average for a gallon of gas in the U.S. is $3.88, according to AAA, dramatically higher than the $2.90 it was before the war started.
One idea that’s been floated to tame U.S. gas prices is to restrict the amount of oil that’s exported from America, but White House officials have told Axios that’s not being explored. The only reliable way to bring down global energy costs will be to open the Strait of Hormuz, something military analysts say may require U.S. boots on the ground. And there are rumblings that Trump is preparing to do just that, as Reuters reported Wednesday.
The Iran War has cost an estimated $16 billion so far, and the Pentagon is reportedly going to ask for another $200 billion, according to the Washington Post. And if energy prices continue soaring, it seems like a safe bet that the U.S. will need that $200 billion or more. Because, unless the Strait of Hormuz is open, the country is on track to shoot itself in the foot economically.
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