The damage of war to the global economy is "only the tip of the iceberg"! Senior global financial officials warn that the market is "indifferent."

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Top global policymakers and financial officials are issuing a common warning: markets are severely underestimating the destructive impact of the Iran war on the global economy, and the real shockwaves may just be beginning.

At this week’s Spring Meetings of the International Monetary Fund (IMF) and the World Bank held in Washington, a consensus contrary to market optimism is forming—a consensus that even if the war ends quickly, its impact on the global economy will be far deeper and more lasting than expected.

IMF Chief Economist Pierre-Olivier Gourinchas warned that as energy disruptions continue, the Fund's previously set "adverse scenario"—global growth dropping to 2.5%—is becoming "increasingly likely."

Meanwhile, on the same day the IMF downgraded its global growth forecast, the US stock market hit a historic high for the S&P 500 Index, leaving attendees perplexed by the contrast. When IMF Managing Director Kristalina Georgieva was directly asked whether the markets should be more cautious, she replied unequivocally, "I think so."

Tip of the Iceberg: The Full Impact of the Energy Shock Has Yet to Emerge

Qatar’s Finance Minister Ali bin Ahmed Al Kuwari delivered the bluntest warning yet at the IMF meetings. He said, "What we are seeing now is just the tip of the iceberg," and described a scenario in which an energy price shock could turn into a substantial shortage within one to two months—at that point, some governments will "not have enough energy to light their countries."

Al Kuwari also warned that fertilizer shortages would trigger a food crisis. He reminded attendees that Qatar is the source of nearly one-third of the world's helium, a key material for semiconductor manufacturing. "The huge economic shock from this war will not be far off," he said.

International Energy Agency (IEA) Director Fatih Birol characterized this shock as the largest energy crisis in human history. He noted that, although the Strait of Hormuz has effectively been closed for six weeks, the last shipments that left the Persian Gulf before the war are only now arriving at their destinations. "March was a very difficult month globally, and April is likely to be worse than March," he told journalists during the Spring Meetings.

Structural Damage: More Than a Temporary Shock

Policymakers and economists at the meetings emphasized that this war is causing not only cyclical shocks, but also deep structural changes—including higher costs, longer trade routes, more intense geopolitical uncertainty, and ultimately, a decline in potential global growth rates.

World Bank President Ajay Banga warned against thinking of the current situation as "just one more month of pain." "Even if fighting stops and energy facilities are no longer damaged, restoring supply systems will take time," he said.

European Central Bank President Christine Lagarde issued a similar warning regarding the outlook for European growth. Bloomberg Economics Chief Economist Tom Orlik pointed out that markets are betting the US will find a way out of the Iran conflict, but whether this judgment stands depends on whether obstacles like control of the Strait of Hormuz, Iran’s nuclear program, and the Israel-Hezbollah (Lebanon) conflict can be cleared.

Market Optimism: FOMO Overpowers Risk Warnings

In the face of such concentrated pessimistic warnings, the strong performance of US stocks has baffled many attendees. The S&P 500 Index set a historic high on the day the IMF lowered its global growth forecast and remained elevated the next day.

PWC US Chief Economist Alexis Crow said bluntly that "markets are underestimating the severity of the situation," because investors have not yet fully grasped the far-reaching disruptions to the supply chain caused by the war.

Miller Tabak + Co Chief Market Strategist Matt Maley attributed this phenomenon to FOMO—fear of missing out. Signs of easing tensions in the Middle East, optimism about artificial intelligence technology, and strong US corporate earnings have led skeptical investors to abandon caution.

Furthermore, some market participants are reluctant to bet that the Trump administration will stay tough when markets are under pressure—a logic known as "TACO" (Trump Always Capitulates), which to some extent is also supporting risk appetite.

Georgieva pointed out that the relative resilience of US markets partly stems from the US’s natural buffer to energy shocks as an oil exporter, but she emphasized, "This is not the story elsewhere. In the rest of the world, there is already a lot of pain."

Chain Reaction: A Fragile Global System Faces a Test

According to an informed source, deep concern about the severity of the crisis pervades IMF corridors, with the greatest worry being that the energy shock will trigger a chain reaction spreading to global financial markets. How to convey accurate information without causing panic has become a major challenge for policymakers.

JPMorgan and Bridgewater Associates veteran, and current Senior Fellow at the Council on Foreign Relations, Rebecca Patterson believes the key point many investors overlook is that the pathway of this energy shock is highly similar to that of the Covid pandemic—"there is rolling contagion." "Asia is the first to feel the disruption in energy supply, Europe is now feeling it, and the US is next, because the last shipments from the Gulf region are about to arrive," she said.

Lazard Sovereign Advisory Head Pierre Cailleteau issued a warning from a more macro perspective: After the tariff shocks, the pandemic, and the Russia-Ukraine war, government debt levels have risen and fiscal space to respond to crises has shrunk dramatically. "Nobody knows how close we are to the tipping point, but economic, financial, and social resilience are not infinite," he said.

Risk DisclaimerThe market carries risks, and investment requires caution. This article does not constitute personal investment advice, nor does it consider the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular situation. Investing accordingly is at your own risk. ```