The war in the Middle East plunges the capitalist economy into chaos

The crisis surrounding the Strait of Hormuz and its global economic consequences reveal, once again, the historical impasse into which capitalism is dragging all of humanity. The war that has been raging in the Middle East since February 2026 is part of a dynamic of accelerated collapse of the global capitalist order,[1] a dynamic in which every manifestation of the decomposition of the capitalist system (uncontrollable wars, environmental crises, populism, etc.) has repercussions on all other fronts, including the economic sphere, which for a long time had been kept under control, however precariously. This was thanks to relatively coordinated responses by the bourgeoisie at the international level (such as the massive injection of money by central banks following the 2008 crisis) and the existence of robust international economic institutions.

The clearest expression of this endless spiral toward the abyss lies in the way the bourgeoisies of the major powers, in their desperate attempts to save themselves individually, are dragging the entire global economy toward a crisis that even bourgeois experts acknowledge as unprecedented.

An economic crisis caused by a bankrupt system

From the very origins of the workers’ movement, the limits of capitalism have been identified in the inability of the capitalist mode of production to absorb the entirety of its output within its own sphere. Chronic overproduction of commodities can only be contained by the conquest of new markets, which themselves eventually become integrated into the capitalist sphere and contribute to increasing the quantity of commodities. This leads to the reliance on debt: initially a factor accelerating capitalist expansion, it inevitably evolves into widespread deception, creating ‘virtual’ outlets for overproduction that can only be repaid through further debt.

The current level of overproduction and debt is therefore unprecedented and continues to grow. Globalisation, which, starting in the 1980s, had made it possible to temporarily ease the tensions linked to the protectionist tendencies inherent in capitalism in crisis and of opening up new markets, particularly in Asia, is also reaching its limits. The Chinese domestic market, in particular, is increasingly running out of steam, pushing China to export to other markets already stifled by overproduction.

It is in this context, under the pressure of the ‘every man for himself’ mentality characteristic of capitalism in decomposition, that the major powers are tending to return to protectionism and begin the dismantling of globalised production chains. The most extreme example is undoubtedly Trump’s tariff policy, intended to protect and boost the U.S. economy, particularly the manufacturing sector. But Europe is not to be outdone with its “European preference” policy aimed at “doing to Chinese companies what China has been doing to European companies for the past twenty years,” to quote the European Commission in the context of its Industrial Acceleration Act[2]. This protectionist drive is therefore not the whim of an isolated leader but rather a somewhat desperate general approach—for example, by Europeans attempting to counter China’s equally desperate move to compensate for the sluggishness of its domestic market.

But all these policies only exacerbate global overproduction by fragmenting it, confining any form of response within national borders, and thus driving open trade wars in all directions, which in turn fuel the tensions and militarism that generate a proliferation of endless armed conflicts. They also lead to the dismantling of the last remaining tools for regulating the global economy: the World Trade Organisation, the International Monetary Fund, multilateral trade agreements, central bank coordination mechanisms... everything is being gradually eroded. This leaves the door open to a now completely deregulated ‘every man for himself’ scenario and the absence of coordinated crisis management, leading, for example, central banks around the world to face “a difficult combination of circumstances[3],” to choose between two equally ineffective options: raising central bank interest rates[4] to curb inflation or lowering them to support growth. In a capitalist world in decline, such crisis management tools have become, at best, ineffective; at worst, counterproductive.

The protectionism advocated by Trump is therefore anything but a solution to the crisis. On the contrary, it breeds unprecedented uncertainty. As the World Economics Journal writes: “the uncertainty caused by tariffs is particularly problematic for both investors and businesses. Thus, the indirect effects appear to be far more severe than the direct ones. In addition to increasing uncertainty, trade wars deteriorate relations between the United States and other countries, while damaging the U.S.’s reputation as an economic partner. At the same time, they do not fully resolve the problems President Trump sought to address, namely full employment and increased manufacturing activity[5].”

Any isolated attempt by a capitalist state to resolve the crisis on its own thus only deepens the crisis on a global scale. This is the fundamental law of the period. Trump’s policies (tariffs, immigration restrictions, cuts to research and health budgets) are not policies for economic recovery. They are suicidal policies: they undermine the very foundations of American capitalist reproduction, notably through soaring unemployment, in the name of short-term survival that merely postpones and amplifies the inevitability of catastrophe.

Yet not all of the bourgeoisie is burying its head in the sand in this situation, nor does it see only the positive in the prospect of its own flourishing economy operating in a closed loop, surrounded by a world collapsing on the other side of the walls. An economist like Richard Bookstaber, a former official at the U.S. Treasury who predicted the subprime crisis in 2008, is inevitably listened to and quoted by the press worldwide when he predicts a crisis that is likely to be even more severe[6]. His logic is clear: today, the interconnection of economies is at its peak, contrary to what protectionist policies might suggest, and financial flows are carried by a fragile physical infrastructure that extreme geopolitical risk makes increasingly vulnerable. Data centres are indispensable vehicles of global finance that rely on highly contested physical resources (water, electrical grids, rare earths, supply chains). Then there is also the rise of private credit, which concerns him: since the 2008 crisis, credit has increasingly been provided by non-bank entities such as investment funds, whose fragility stems from “the opacity of the valuation of [their] assets and [their] concentration on a limited number of borrowers, particularly tech giants[7].”

The war in the Middle East delivers the final blow

Such was the grim picture that could be painted before the first missile struck Iran. As The New York Times put it, “The war spreading in Iran has dealt a stunning blow to a global economy that had already been battered by the collapse of the international trading order, the war in Ukraine, and President Trump’s chaotic policy making“[8]. Trump’s decision to attack Iran (a country that controls access to the Strait of Hormuz, through which approximately 15% of the world’s oil supply passes) defies any rational economic logic, even from the perspective of the long-term interests of American capitalism.

But Iran’s closure of the Strait of Hormuz has consequences that extend far beyond the oil market alone. The disruption of global supply chains—already weakened by the 2020 pandemic, the war in Ukraine, and the U.S. protectionist push in particular—is entering a new phase of turmoil. The disruption is global and very tangible: from the start of the war, in Kansas, homebuyers saw 30-year mortgage rates exceed 6%; in western India, grieving families discovered that gas crematoriums had closed; in Hanoi, gas stations ran out of fuel; in Kenya, tea farmers feared that their exports to Iran would rot on the docks[9]. It is an entire system being swept into the unknown that makes this war a historic event.

A historic event also because its effects will last well beyond the conflict itself. First, the disruption of maritime and air transport: the insecurity of shipping lanes in the Persian Gulf and its surrounding areas, port congestion—particularly in China, the impossibility of deploying alternative land-based infrastructure in the short term, and the inability of the new Arctic routes, closely watched by the powers of the Northern Hemisphere, to take over in the short term.

Second, the risk to global agriculture due to disruptions in fertiliser supplies. Qatar, whose main liquefied natural gas export facility was shut down following a drone attack, is also a major producer of raw materials for the fertiliser industry. The rise in fertiliser costs (already evident since the invasion of Ukraine in 2022) has a direct impact on agricultural production costs worldwide, threatening food security in the poorest countries. But even more significantly, agricultural production itself will be directly impacted in terms of volume—and in a lasting way—posing a risk to food security across the entire planet.

Finally, it is important to highlight the slowdown—or even standstill—in investment across many sectors, given the unprecedented unpredictability of U.S. policy, whose objectives change from one day to the next. The structural uncertainty generated by Trump’s policy—first regarding tariffs and then the trade war—with a U.S. leader capable of partially backing down in the face of market pressure, or even resorting to the most brazen lies, before committing to new policies that are just as uncertain, undermines the very foundations of investor confidence.

The capitalist economy’s dependence on energy resources has been a constant since at least the advent of electricity in production. Coal and then oil have long dominated electricity generation. While this is less the case today, oil and gas remain indispensable for transportation—a central function in the globalised economy that makes dependence on hydrocarbons more of a vulnerability than an opportunity for profit. By closing the Strait of Hormuz, Iran—acting on a purely suicidal logic of “if I fall, everyone falls with me”—is aware that it possesses a major weapon of retaliation against the global economy. This is all the more true given that the threat is here to stay, if not permanently. As The Economist writes: “even when the war ends, the world will have changed.” Iran’s new Supreme Leader, Mojtaba Khamenei, now knows that energy prices are the United States’ Achilles’ heel. In Ukraine, which has tested drone defense systems, some Iranian-style drones still manage to get through. There are no plans for U.S. troops to occupy Iran to put an end to these launches. The United States lacks the capacity to defend all oil tankers, even if it provides them with cheap insurance. Disruptions in energy markets will therefore be recurrent as geopolitical tensions flare up, especially if Iran concludes that it needs a nuclear weapon to ensure its security”[10]]

Finally, the sharp decline in hydrocarbon production poses a risk of a stock market crisis due to their importance in the development of artificial intelligence: “The helium needed for semiconductor production comes from the war-torn region, and many Asian factories operate using energy derived from imported hydrocarbons. And maritime transport conditions in Asia are becoming increasingly strained every day, particularly in Singapore, which is the world’s largest supply port but also produces 10% of the world’s chips and 20% of manufacturing equipment. […]All of these factors could suddenly burst the bubble that has benefited companies like OpenAI and Nvidia across the Atlantic. And trigger a stock market crash”[11].

The economic crisis is accelerating environmental destruction

All of this is without accounting for the acceleration of ecological disasters, particularly in the region affected by the conflict. In three weeks of war, more than 300 incidents involving environmental risks were recorded by the Observatory of Conflicts and the Environment. The most striking incidents were caused by the bombing of hydrocarbon-related facilities in Iran, which plunged the capital Tehran into darkness and generated a cloud of fine, toxic particlesin a city already vulnerable to air pollution, while causing lasting contamination of the country’s drinking water facilities and groundwater, as reported by IRIS, which notes that “armed conflicts can act as accelerators of environmental degradation: industrial fires, soil contamination, marine pollution, or damage to water resources amplify existing ecological pressures,” thereby making war “a full-fledged factor in the ecological crisis.”[12]

But one of the strategic resources in the conflict remains water, a scarce commodity in the region, to such an extent that the growing needs linked to industry as well as tourism in the Gulf states must be met largely through the production of desalinated water. These facilities have already been targeted by Iranian missiles, and the United States continues to threaten to completely destroy these facilities in Iran, thereby risking rendering these regions permanently uninhabitable.

All of this adds to the ecological disaster that capitalism has already inflicted on the planet. Ecological destruction is inherent in the very logic of a system that prioritises capital without regard for the environment, even as this destruction of the environment constitutes a direct and lasting threat to capitalist production. The war in the Middle East is a new and frightening illustration of this irrationality.

This overview should leave no doubt about the long-term persistence of this war’s effects on the capitalist economy. As The Economist writes: “It is difficult to predict how this crisis will end. But even if countries adopt the right policies, it is already clear that the war has made the global economy less prosperous, more volatile, and harder to govern.”[13]

The working class, the primary victim of the crisis

Capitalism’s sustained plunge into a new and unprecedented multifactorial crisis will inevitably lead the bourgeoisie to seek solutions by exploiting the labour force. It is the working class that is already paying the price for the decomposition of capitalism; it is the working class that will pay more and more for this brutal acceleration of the system’s decay until it finds the path to a decisive confrontation with this system of exploitation and misery. The New York Times lists the following elements: “gas prices at the pump are affected. But so are the prices of food, medicine, airline tickets, electricity, cooking oil, semiconductors, and much more.”[14]

Trump’s “America First” policy had already failed to produce the results he had hoped for. Having failed to develop the manufacturing sector through protectionism and achieve full employment through its immigration policy, the world’s leading power now faces an unprecedented crisis and a surge in unemployment. European and Asian powers are not spared: growth in Europe is expected to at least slow down and be accompanied by a renewed rise in inflation. In China, where growth now relies fundamentally on the trade surplus, the slowdown in transportation and the scarcity of hydrocarbons will weigh on growth that is already experiencing a sharp slowdown, with inevitable effects on unemployment and purchasing power.

Added to this—and already underway—is the strengthening of the war economy, which, since 2022, has been the central focus of the major powers. Military budgets, already rising sharply, are absorbing an ever-greater share of financial resources.

The working class will face increasingly frequent and severe attacks on its living and working conditions, with inflation that wages will not offset and an acceleration of the pace of work to meet the demands of the “national war effort.” This undeniably creates the objective conditions for the development of a reaction by the working class and the growth of its struggles.

However, the bourgeoisie is aware of this and will mobilise all means at its disposal to hinder the development of the working class’s consciousness. It knows that the outbreak of war always provokes a moment of shock and fear. Already, rising gasoline prices and the expected increase in gas prices tend to generate reflexes of individualistic withdrawal. Mass unemployment, which is already present in the United States and increasingly threatens Europe, also has deleterious effects on the necessary unity of the proletariat. Finally, the crisis affects not only the working class but all of society, with possible reactions taking the form of riots or interclassist revolts, as France experienced with the Yellow Vests crisis beginning in late 2018—a movement already triggered by rising fuel prices and initiated by the petty bourgeoisie and small business owners in the trucking industry.

However, even if the crisis affects the whole of society, it is the working class that will be most severely hit, for it is at the heart of capitalist production. It is from the working class that the war effort will demand the most; it is the working class that will suffer the most massive job losses in the face of the economic slowdown; it is the working class that will see its purchasing power melt away in the face of inflation; it is the working class that will suffer the most from shortages of medicines, the food crisis, the unbearable cost of heating, etc.

GD, April 2026.

 

 

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[1] See in particular our Report on the Economic Crisis in the International Review 174 (2025)

[2] Les Echos, March 4, 2026.

[3] The New York Times, March 12, 2026

[4] The price at which banks purchase currency from central banks.

[5] The World Economics Journal, April–May 2026

[6] The New York Times, March 16, 2026

[7] Le Monde, March 20, 2026

[8] The New York Times, March 16, 2026

[9] ibid

[10] The Economist, March 14, 2026

[11] Challenges, April 2, 2026

[12] The War in Iran: A Conflict with Lasting Environmental and Health Consequences

[13] The Economist, March 14, 2026

[14] The New York Times, March 12, 2026