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BLOG — June 24, 2025
With a fragile ceasefire and deep uncertainty around any resumption in nuclear negotiations, the Middle East remains at severe risk of interstate war between Israel-Iran, with scope for escalation to a multifront conflict.
We ran a scenario to illustrate the potential impacts of an extreme escalation toward a regional conflict in the Middle East. This scenario is based on assumptions and should be viewed as a possible outcome rather than a prediction.
In this scenario, we have assumed that:
Running this scenario indicated these possible outcomes:
Why this matters
The risk of miscalculation or unintended escalation among all key stakeholders remains high, with the potential for a broader regional war that could destabilize the Middle East and disrupt the global economy.
Our proprietary Global Link Model suggests that a regional war in the Middle East would cause the global economy to shrink by 1.7% in Q3, the first contraction since Q2 2020 (down 1.2%) during the pandemic.
The projected growth rates in most major economies remain well below where they were prior to the November 2024 US elections, reflecting the unfolding impact of ongoing trade tensions and related uncertainties.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.