The missiles of the first Gulf War, between 1990 and 1991, also gave substance to a significant slowdown in the economic growth in the major world economies. The macro fundamentals of that time are not comparable with those of today: there was no China Influencing global industrial supply, and globalization was still in the process of governing trade and production flows. Today, with a much more integrated international economy than then and with extremely long value chains, the effects of the third Gulf War on global growth may be partly underestimated by forecasters.
Some observers draw parallels with the early 1990s, when Iraq's invasion of Kuwait led to the Gulf War and a recessionary oil shock. I also find this parallel apt, and more appropriate than a comparison with 2021-22, a period in which inflation was accompanied by very robust post-pandemic growth in all advanced economies,” observes the economist. Guido Lorenzoni who teaches at the University of Chicago Business School (Booth).
What if the conflict were to drag on for months, with structural damage to some energy infrastructure?
"The damage to infrastructure is already there. Analysts predict that, even in the most optimistic scenario of a rapid end to the conflict, it will take four months or more to restore regular supplies. My impression is that the markets are overly optimistic, both about growth and the medium-term energy shock."
But won't tensions over energy prices and supplies have uniform effects across different economic areas?
The shock is global and will also affect the United States, which is also an energy exporter. The energy market is a global market: energy prices will therefore rise even for American households, the vast majority of whom do not own oil wells. That said, it's plausible that Europe will suffer a stronger shock, especially in the natural gas market, which is less globally integrated.
In 2026, central banks believed inflation was under control. What could happen now?
“Here too, the parallel with the 1990s suggests a less persistent inflationary shock than the one in 2021-22, but more damaging to growth.”
In this situation, what could be the reactions of the ECB and the Fed?
The ECB and the Fed are coming off a difficult period of fighting inflation: I believe their reactions will be influenced by this experience. It's also one of the reasons I expect a more negative impact on growth. There's an element of greater uncertainty surrounding the Fed's leadership change, but my impression is that, once in office, Warsh will prove to be a fairly conventional president.
In the United States, amid tariffs and upward price hikes for energy products, are any concrete effects foreseeable on Americans' shopping carts? Able to openly challenge the Administration's military choices…
The Trump administration is certainly concerned about the inflationary effects of an energy shock. Unfortunately, however, while Trump could move back and forth on tariffs as he pleased, in the case of the war with Iran, he has much more limited control over the course of events.
The war is once again highlighting the critical issues of many global logistics and production chains.
The effective closure of the Strait of Hormuz once again highlights how exploiting economic pressure points can significantly damage global growth. I don't believe these tensions are easily resolved by moving toward reshoring. The economics of value chains are too complex and offer too great an efficiency benefit.
Isn't this a further push towards reshoring-nearshoring for geographical areas of strategic affinity?
"I don't believe economic policy has the tools to redirect these chains, except by creating significant inefficiencies. For this reason, my impression is that the level of integration and globalization will remain high, but will be subject to increasingly frequent shocks."
The Third Gulf War is taking further steps towards the reorganization of international relations, especially of a commercial nature.
I try to remain optimistic and continue to believe that global trade integration is a force capable of dissuading various political actors from a completely conflictual vision of relations between the various blocs. In a certain sense, the fact that the oil shock is pushing the Trump Administration to reconsider its war options is a sign that economic relations can help contain conflicts.
