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People in Tehran line up to fill up their cars and motorbikes outside a gas station on Saturday after an attack on Iran by the U.S. and Israel.ATTA KENARE/AFP/Getty Images
John Rapley is a contributing columnist for The Globe and Mail. He is an author and academic whose books include Why Empires Fall and Twilight of the Money Gods.
It’s hard to say what U.S. President Donald Trump’s interest in Saturday’s Iran attack is. He has expressed a number of goals at different times, but none of them is especially compelling. More puzzling still is that for a president whose party faces a difficult set of elections this year, this is a military campaign with potentially large economic risks, and no obvious payoff.
Unlike in Venezuela, Mr. Trump hasn’t said this attack is about oil, and anyhow it’s hard to see how it could be. Without a substantial and long-lasting occupation, the U.S. couldn’t secure control of Iranian output anyhow. But in the short term, the impact both on Iranian exports and shipping in the region is going to add a premium to the world price of oil.
Oil had finished the week roughly 10 per cent up where it ended 2025. We’ll have to wait for the oil markets to open in Asia on Monday to see whether prices rise much higher. But analysts are expecting that.
At the moment, we’re left to speculate based on the performance of risk assets which do trade over the weekend, namely cryptocurrency. So far, what we’ve seen is concern among traders but not outright panic. Mind you, that may itself be a concerning sign.
Analysis: Trump takes on his biggest bet so far in striking Iran
Market analysts have begun to detect a high degree of optimism among traders in recent weeks, based on apparent expectation that the world economy, led by the U.S., will continue growing strongly this year, recording low inflation and producing continued high profits. They’re also assuming that this war will be resolved quickly and in the favour of the U.S./Israel alliance.
Almost all of those are questionable assumptions. Most indications are the Iranian regime will be humbled if not destroyed by the war, but few analysts would predict that will give way to a speedy resolution. Prolonged instability is the more likely scenario.
And for as long as that instability continues, energy markets, already under pressure from the artificial intelligence boom that is driving up electricity prices – particularly in the U.S. – will keep inflation from falling. Last week’s producer price inflation report showed that if anything, inflation is going to heat up in the U.S. this year.
Therefore, it is looking increasingly questionable that the Federal Reserve will cut interest rates much, if at all, this year, and it may even end up raising them. Other central banks may find it necessary to follow suit, to prevent spillover effects like weakening currencies or higher inflation in their own economies.
Higher interest rates will, in turn, put a brake on economic growth at the very time there are signs it may be slowing. The final quarter of U.S. gross-domestic-product growth came in much weaker than expected, and while most economists believe that the tax cuts which take effect this year in the U.S. will add a tailwind to growth, there are early reports that the refunds that are appearing aren’t turning out to be as big as previously expected.
In sum, at a time when most G7 economies are struggling to get moving and China’s economy is slowing, the world’s biggest economy – which is still a big source of demand in the world economy – may be heading into choppy waters.
Last week’s market reaction to Nvidia’s earnings report showed just how dangerous the optimism and complacency in the markets can be: After it blew through expectations, the company’s share price fell, revealing that investors expected it to do even better.
The same could happen in world energy markets. If this war leads to any other outcome than a quick regime collapse, followed by the successful installation of a new Iranian government that quickly consolidates power – or alternatively, to a quick declaration of victory by Trump without any change in the regime – anxiety may rise quickly in world oil markets. And if that happens, the prospects for 2026 could quickly darken.
