Bearing the brunt of global disorder

The US-Iran war is hurting the world. No country - rich or poor, large or small - has been spared. Pakistan is among those that have been gravely hurt. It is paying a heavy price due to the sharp rise in the cost of essential commodities it imports. Gasoline, diesel, and cooking oil prices have increased, affecting the poor more than those who are relatively better off. In poor nations, half of the average household income goes toward purchasing food and energy. As a large proportion of the population in these countries lives on the edge of economic deprivation, with little savings for rainy days, the price surge has hit the poorest segments particularly hard.

The global fallout resulting from the war has gravely damaged the world's economic, social and political order constructed after the end of World War II. Eswar Prasad, an international economist of Indian origin who served at the International Monetary Fund before taking up a teaching position at Cornell University, has aptly summarised the global situation created by the moves the US president made during his second term. He did so in an article published in The New York Times on April 25, 2026, titled "Nearly Half of the World Is Bearing the Brunt of the Global Disorder." He wrote, that there is nothing new in the situation faced by the world's poor nations: "This is hardly new. These countries, especially smaller ones, have always borne the brunt of global disorder, from wars to financial crises. Today, about 75 countries have average annual income per capita of less than $4,50. By contrast the United States income per head is $85,000. Some of the problems poor nations face are of their own making - the result of internal mismanagement and rampant corruption, which expose them to high levels of debt and inflation. But they also face strong headwinds, and barring a few exceptions such as India, these countries typically have no seat at the table at discussions about global issues that affect them profoundly."

Prasad's description applies well to Pakistan but with one important difference. India has worked hard to keep Pakistan out of institutions and bodies where international economic issues are discussed. For instance, Indian opposition has kept Pakistan out of the G20, a group of nations that discuss and take positions on global economic issues that ultimately influence international institutions such as the International Monetary Fund and the World Bank.

When the US–Iran war ends - an outcome that may take a long time - the damage to the global economy is likely to be significant. New forecasts continue to emerge, mostly ranging from bad to worse. Trump's rhetoric has also grown sharper in both tone and content. In a speech from the White House on April 4, he said, "Over the next two to three weeks, we're going to bring Iran back to the Stone Ages, where they belong. In the meantime, discussions are ongoing." That threat has not yet materialised. Even if President Donald Trump concludes in the coming weeks that his country has done enough fighting, the energy shock resulting from the war will make it clear that stability in global energy markets cannot be restored so easily.

Iran certainly has a say in the matter, especially when it comes to navigating the narrow Hormuz Strait. In its base scenario, Capital Economics, an independent research firm based in London, assigned in late March a two-thirds probability to the war ending by the end of summer of 2026. Under this relatively benign outcome, the United States would probably fare better than the countries that rely on imported energy.

The International Monetary Fund, in a note posted online in late April, said that there were just too many possible outcomes to project for the future. But no matter how you look at it, said the Fund, "all roads lead to higher prices and growth." Some outcomes would be particularly painful, especially for vulnerable regions, with the worst affected being poor energy importing countries in Africa, Asia and Latin America. "Low-income countries are especially at risk of food insecurity," wrote the authors of an IMF report. But there are heightened risks coming from several directions. The Artificial Intelligence boom could falter, or Trump's tariffs could further derail the economy.

I will conclude this by reflecting on how India might be affected by the changes in the global economy. The focus on India is appropriate since there is a lot common between India and Pakistan. However, the Indian situation has been studied more by research institutions around the world. According to several analyses, any extended disruption in global trade is likely to strain India's finances. The government has the power to control fuel prices, by cutting excise duties or expanding subsidies. But doing so for a long period would add to fiscal pressure. India has relied heavily on oil shipped through the Strait of Hormuz.

For political reasons, Indian Prime Minister Narendra Modi is likely to keep most prices in check ahead of the state elections in the spring of this year. His government has worked to secure supplies of oil by buying from Russia, using its close relations with Washington to bypass the sanctions imposed by the US government on Russian foreign trade. India also secured safe passage for two tankers carrying gas that had been stranded in the Strait of Hormuz after speaking with Iranian officials. In a research note released in late April, the Australian ANZ banking group mentioned that while the Indian economy was starting from a position of strength with a high growth rate and low inflation, "its ability to cope with a durable energy shock will be tested."

The ANZ report said that the county's economic players - oil companies, the government and individual households - "do not have robust financial buffers to withstand a prolonged oil price shock." Rathan Roy, an economist at GITAM, a university in the southern city of Hyderabad, said that the crisis in the Gulf would force India to "watch its balance of payments very, very closely." According to Tamiz Ahmad, a retired Indian diplomat, around 10 million Indians make their home in the Gulf states. "Every project in the Gulf has an Indian fingerprint," he said.