The global economy has entered a dark tunnel of uncertainty, driven by the escalation of accelerating geopolitical tensions, led by the war in the Middle East.
These conflicts coincide with stern warnings issued by major international institutions, noting that rising global government debt has become an existential threat to financial stability, as military crises intersect with the fragility of the international economy's infrastructure.
Indebtedness. Reaching dangerous historical levels
The International Monetary Fund estimates that global public debt is heading towards a peak not seen since the end of World War II, with 94% of global output expected to reach 100% by 2029. In a worst-case scenario, debt could touch the 121% mark, putting fragile and emerging economies to harsh tests that could lead to accelerated financial collapses.
Drivers of Crisis and Accumulation of Pressures
Experts attribute this sharp rise in indebtedness to the combination of four main factors: the militarization of budgets, i.e. increased defense and social spending to counter security tensions, the increase in the burden of debt servicing as a result of interest rates remaining at high levels for long periods, the reduction in the fiscal space available for countries to intervene in crises, in addition to the accumulation of economic pressures inherited from the COVID-19 pandemic and the Russia-Ukraine war, leading up to the current conflict.
Energy shock and supply chain disruption
The war in the region has caused a new shock to global markets, with energy prices jumping by about 19% during 2026.
This rise, combined with rising marine insurance costs and disruption of shipping lanes, has eroded purchasing power and raised production costs globally, prompting the IMF and the World Bank to revise their downward global growth forecasts and raise inflation estimates for the coming years.
Advanced economies in the eye of the storm
The major powers were not spared from this blow, with estimates showing a clear decline in economic performance.
In the United States, growth is projected to decline to 2.3% in 2026.
Germany and the United Kingdom: Growth forecasts were lowered by 0.5 to 0.6 percentage points.
Eurozone: Downgrading growth targets to 1.1%, reflecting the depth of the structural crisis facing the old continent.
International calls for coordinated action
Rodrigo Valdez, the IMF's chief fiscal officer, said the world is facing a "new test" that cannot tolerate a delay in reform.
Mary Svenstroup, a former US Treasury official, warned that emerging markets are the weakest link in this crisis as their reserves are depleted.
As crises continue to overlap, there is an urgent need for broad international coordination to safeguard financial stability and prevent the world from sliding into uncontrollable sovereign debt crises.