That policy marked a pivotal turning point in the trajectory of the global economic system. Although it appeared exceptional and unprecedented at the time, it set in motion a long series of unconventional economic policies and government interventions aimed at addressing the crises the lockdown itself had generated.
The economic reality produced by those policies gave rise to a range of complex crises while simultaneously creating new phenomena carrying the seeds of future challenges. Among the most significant of the crises was the surge in global debt, encompassing government, corporate, and household obligations, to record levels approaching $353 trillion, equivalent to roughly 280 percent of annual global gross domestic product (GDP). Put plainly, the world and its peoples and governments would need to work and produce without interruption for two years and nine months, devoting all output solely to repaying outstanding debts.
Among the most notable of the new economic phenomena to expand dramatically in recent years is the record surge in artificial intelligence (AI) investment. According to Goldman Sachs, AI investment is expected to exceed $527 billion in 2026, more than double its estimated level of approximately $237 billion in 2024, and is projected to reach nearly $4.8 trillion by the end of the current decade.
That rapid growth has generated considerable concern about the sector’s future, particularly given that Goldman Sachs also noted a decline in investor confidence during the second half of 2025 regarding AI’s ability to generate attractive returns. That shift may signal emerging stress within the sector and raise the prospect of a bubble forming in the coming decade, with potentially serious consequences for the global economy.
Canvassing these crises and phenomena is not intended to offer an exhaustive inventory of the challenges weighing on the global economy in recent years, nor to exaggerate the risks it faces today. Rather, the objective is to illuminate the contours of a global economic landscape already in the process of change.
The year 2026 has introduced additional signs of transformation that could shape the international economic system for years to come. Since the start of the year, the world has passed through two particularly significant milestones: the US-Israeli-Iranian war and US President Donald Trump’s visit to China. The common thread linking both is that Trump has played a central role in each.
The First Milestone: The Iran War
On February 28, 2026, President Trump authorized US forces to launch air strikes, in coordination with their Israeli counterparts, against strategic sites inside Iran. That attack marked the beginning of a new phase in the history of the international system, though arguably more consequential were the economic reverberations that followed.
The strikes triggered a war that began within Iran before expanding beyond its borders, resulting in the closure of navigation through the Strait of Hormuz, the disruption of energy supply chains and the flow of numerous strategic goods through the strait, the suspension of air traffic across the region, and damage to infrastructure in several countries. A crisis erupting in one of the world’s most strategically vital regions pushed the global economy into one of the most complex crises in its modern history.
The Strait of Hormuz is not merely a narrow waterway in some remote corner of the world whose closure would produce only a marginal disruption to global trade. It lies at the heart of a region where several countries occupy pivotal positions on the global energy map.
The states bordering the Arabian Gulf possess proven crude oil reserves of approximately 865 billion barrels, accounting for roughly 57.7% of global reserves, and hold around 79 trillion cubic meters of natural gas, representing approximately 37.6% of the world total. In terms of production, the region generates roughly 30 million barrels of oil per day, about 29% of global output, and contributes approximately 10.7% of worldwide natural gas production, equivalent to around 464 billion cubic meters annually.
Consequently, the Iran war deprived the global economy of the oil and liquefied natural gas (LNG) flows transiting the strait, through which approximately 38% of the world’s seaborne crude oil shipments pass, along with around 29% of global liquefied petroleum gas (LPG) and 19% of both LNG and refined petroleum products. The global economy was also cut off from approximately 13% of worldwide petrochemical trade, 3% of global container trade, and nearly 2% of global bulk cargo trade.
Beyond energy, the countries of the region account for approximately 5.2% of international travel activity and more than 7% of global tourism revenues. The war’s eruption thus produced negative repercussions for the very foundations of the world economy, to the point that global economic security itself came under threat.
The impact of the Iran war on the global economy is not limited to what has already occurred. The eventual post-conflict outcome may produce significant changes in the global economic landscape, depending on whether the conflict is ultimately resolved and on the nature of the reality that follows under either scenario.
Amid recurring reports of a possible memorandum of understanding between Washington and Tehran to suspend hostilities for two months while negotiations proceed on disputed issues, set against the backdrop of the United States’ intermittent strikes against targets inside Iran, the contradictory and uncertain character of events makes it difficult to predict where matters will lead. The situation remains open to every possibility, from the continuation of the conflict to its termination, and each carries a broad spectrum of consequences for the global economy and its future.
An unresolved conflict would leave the Middle East in a prolonged state of instability, implying chronic disruptions to energy supplies and strategic commodity supply chains. Accumulating losses for the global economy would likely drive a restructuring of global trade and investment patterns. Countries dependent on energy and strategic imports disrupted by the war may also be prompted to reconsider their supplier networks.
Trade flows would likely shift increasingly eastward, concentrating in East Asia, where a bloc of emerging energy-importing economies could strengthen their ties with Russia, thereby providing Moscow with additional instruments of economic leverage against its rivals. At the same time, elevated energy prices would remain a persistent challenge for import-dependent economies, foremost among them Europe. Budget deficits could rise, government debt could expand worldwide, and central banks might resort to selling portions of their gold reserves.
Taken together, these developments could alter the balance of power within the global economic system.
A settlement, should one materialize, would open a range of scenarios, from a temporary partial agreement to a comprehensive and permanent one, with numerous intermediate outcomes in between. Each scenario generates its own spectrum of consequences for the global economic system.
A comprehensive and permanent settlement would be the most significant, precisely because it would represent a sharp departure from the pre-war reality and stand in complete contrast to the no-settlement scenario outlined above.
Under such a settlement, navigation through the Strait of Hormuz might become more complex and more costly. Sanctions on Iran could also be lifted, allowing its oil and natural gas to return fully to global markets and enabling an expansion of its production capacity—developments that could cause a surge in global supply and intensify competition for market share in major energy-consuming markets.
Whatever the outcome, the most enduring and profound effect of the Iran war lies in the fact that both the closure and the eventual reopening of the Strait of Hormuz compel a reassessment of global risk. The strait’s role as a critical chokepoint for the supply chains of numerous strategic commodities, and its position along major international trade and transportation routes, heightens the likelihood of supply-chain disruptions, rising insurance premiums, increased transportation costs, and delays in delivering goods to markets. All of these factors place additional pressure on the global economy and lay bare how vulnerable the international economic system is to geopolitical crises.
The Second Milestone: Trump’s Visit to China
US President Trump visited Beijing from May 13 to 15, 2026, for meetings with Chinese President Xi Jinping. The circumstances surrounding the visit were themselves the reason so many hopes had been pinned on it, and it was the American side that appeared to be carrying more of those hopes.
Trump arrived with a high-level economic delegation that included senior officials from his administration alongside more than seventeen chief executives and leaders of major US companies spanning technology, artificial intelligence, energy, aviation, manufacturing, agriculture, finance, and banking. Yet the results proved disappointing and fell well short of expectations.
The wide gap between the high hopes attached to the visit and its modest outcomes suggests that a shift may be underway in the balance of power between the United States and China, one with potentially important implications for the structure of the global economic system.
Those expectations were further heightened by the state of relations between the world’s two largest economies, whose combined output accounts for approximately 43.7% of global GDP (with the United States producing about $30.5 trillion and China approximately $19.2 trillion) and which have been locked in an open trade conflict in recent years.
Successive rounds of tariffs imposed by both sides affected bilateral trade in goods valued at between $460 billion and $665 billion, causing total trade exchange to fall from approximately $693.6 billion in 2018 to around $350.9 billion in 2025, a decline of nearly 50%. Trump’s visit was therefore widely expected to produce a resolution to the trade dispute, or at least an extension of the bilateral trade truce, but neither outcome materialized.
The sensitive timing of the visit further amplified these expectations. It coincided with the ongoing repercussions of the Iran war and took place while Washington was engaged in negotiations with Tehran aimed at ending the conflict. The Americans intended to raise with their Chinese counterparts the mechanisms for a settlement and the future of the Strait of Hormuz.
President Trump hoped Beijing would use its influence to pressure Iran into concessions that could facilitate an agreement leading to the strait’s reopening. American hopes rested on China’s well-established ties with Tehran. China is the largest importer of Iranian oil, with its refineries receiving approximately 90% of Iran’s oil exports, and it is also Iran’s leading trading partner in both exports and imports, placing it in a strong position to negotiate.
Washington believed it could persuade China to help resolve the Strait of Hormuz crisis, given the considerable damage that disruptions in the strait inflict on the Chinese economy. China imports approximately 5.4 million barrels of oil per day through the strait, around 36% of its requirements, as well as approximately 20 billion cubic meters of liquefied natural gas annually, accounting for about 5% of its consumption.
China’s recent diplomatic record with Iran further encouraged the Trump administration to count on Beijing’s potential role in resolving the crisis. In March 2023, China brokered an agreement restoring diplomatic relations between Saudi Arabia and Iran—a development widely regarded as significant, given that ties between the two countries had been severed since 2016.
American confidence in Beijing’s leverage was also reinforced by China’s consistently sympathetic posture toward Tehran, evident in its approach to the Iranian nuclear issue, its stance on the escalation between Iran and the United States, and its repeated backing of Iran within the UN Security Council.
Against that backdrop, the Iran war featured on the agenda of Trump’s talks with President Xi. Neither side, however, announced any understandings or agreements on the matter, nor did Beijing signal any commitment to engage Tehran or apply pressure on it to move toward a settlement with Washington. That outcome exposed the limits of American confidence in China’s willingness to play a mediating role. It suggests that Washington failed to persuade Beijing to leverage its influence and close ties with Iran to prevent disruptions to navigation through the Strait of Hormuz or to help bring the conflict to a resolution.
On the substantive outcomes of the visit, US officials, including President Trump, stated that several agreements had been reached between Washington and Beijing. Among them were the establishment of a council to manage bilateral trade relations, expanded access for US companies to Chinese markets, increased Chinese investment in US industries, China’s intention to purchase 200 Boeing aircraft, Chinese purchases of US agricultural products including soybeans and beef, and a deal under which Beijing would buy U.S. oil and natural gas.
Even so, the outcomes fell short of what the visit had been expected to deliver, for several reasons. First and most notably, the announcements regarding economic results came exclusively from the American side; China did not publicly confirm any agreement with Washington. Second, the visit produced no discussions of tariffs or an extension of the trade truce. Third, no progress was made toward resolving US-Chinese disputes over artificial intelligence-related issues.
The announced aircraft deal was also considerably smaller than the long-discussed agreement reportedly under negotiation between Boeing and China for approximately 500 aircraft. Nor did the oil deal represent a genuine breakthrough, given reports that negotiations had already been underway for some time between Chinese refineries and American companies regarding purchases of approximately 600,000 barrels of oil per day.
Transformations Ahead
Taken together, these developments point toward significant changes in the global economic system in the years ahead, whether driven by the new realities the Iran war has created or shaped by the arrangements and mechanisms that may emerge from any future settlement of the conflict. The economic repercussions are likely to ripple outward from the countries directly involved in, or immediately affected by, the crisis to the economies linked to trade and energy flows through the Strait of Hormuz, and ultimately to the global economy as a whole.
The wide gap between the expectations surrounding President Trump’s visit to Beijing and its modest outcome may also signal that China feels little urgency at present to conclude major economic agreements with the United States or to enter into political and diplomatic bargains with Washington. That posture does not stem solely from caution or limited trust in US policies. It may equally reflect China’s firm belief in its capacity to manage the consequences of any disruption to navigation through the Strait of Hormuz, and in its possession of sufficient mechanisms to compensate for lost oil supplies, whether through imports from alternative sources or through withdrawals from strategic reserves.
Beijing also appears to hold that it has no pressing need to reach an agreement resolving its trade conflict with the United States. That position is rooted in a Chinese assessment that the balance of global economic power is gradually shifting in its favor, as continuing signs of Chinese economic and technological ascent contrast with what Beijing perceives as a relative decline in American capabilities. For now, China appears to prefer patience over concession.
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#The writer is the head of Economic Studies Unit at Future Center for Advanced Research and Studies, a UAE-based think tank.
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