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Mar 31, 2026
World recession warning as Trump ‘loses control’ of Iran war
The world risks plunging into recession as Donald Trump appears to have “lost control” of the Iran war, a City bank has warned.
Major economies face a “real risk of an inflationary recession” if the conflict in the Middle East drags on, according to Peel Hunt, which said it could not rule out higher rates.
Even a swift end to the conflict now would fail to end economic disruption for at least another two weeks, it warned.
The investment bank said a quick resolution to the war had become harder for the US president to achieve. This “increases the risk that the Strait of Hormuz remains blocked even once fighting ends”, it added.
Mr Trump was considering ending the war without a deal to reopen the waterway, according to the Wall Street Journal, despite its importance as a shipping route for a fifth of the world’s oil and gas exports.
On Tuesday, the US president told Britain and other countries to “go get your own oil” and to take the Strait of Hormuz for themselves to fix the energy crisis triggered by its closure.
Kallum Pickering, chief economist at Peel Hunt, said: “Donald Trump may have lost control of the situation, which makes a quick (unilateral) resolution harder and increases the risk that the Strait of Hormuz remains blocked even once fighting ends.”
He said the energy shock from the war “appears to be spreading from West to East – with shutdowns already in place in parts of Asia and Australia”.
“If Europe is next, this will amplify global recession fears,” he said.
Eurozone inflation jumped from 1.9pc to 2.5pc in March, its steepest rise since 2022, as energy prices surged by 4.9pc off the back of the Iran war, official figures released on Tuesday showed.
The consultancy Capital Economics the risks of a global recession would increase further in the event of attacks by Houthis on shipping in the Red Sea. The Iran backed group joined the war for the first time at the weekend as they fired rockets at Israel.
Mr Pickering warned: “If the war drags on, there is a real risk of an inflationary recession unfolding in major economies, with central banks struggling to ease policy until inflation risks fade. Rate hikes could not be ruled out.”
Sir Keir Starmer urged businesses to help the Government protect households from soaring prices on Monday. In a Downing Street meeting, he told bosses that “the Government can’t do it on its own”.
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