The French newspaper Le Figaro said that the global economy is not facing a temporary, circumstantial shock, but rather a threat of disintegration reminiscent of the dynamics of the 1930s.
On the surface, the global economy appears remarkably resilient. Since the beginning of the decade, it has faced a series of shocks, including the COVID-19 pandemic, the wars in Ukraine, Gaza, and Iran, the trade war launched by Donald Trump which raised average US tariffs from 2.4% to 16.8%, and an oil price shock. Nevertheless, the International Monetary Fund anticipates a slowdown in global growth.
Companies continue to demonstrate a remarkable ability to adapt to uncertainty, while financial markets appear to be in a state of excessive recovery, as evidenced by the S&P 500 index, which has an average price-to-earnings ratio of 25, eight points higher than the average of the past two decades.
However, the reality is quite different. The gap is widening between the performance of financial markets on the one hand, and escalating geopolitical tensions and deteriorating economic fundamentals on the other. Wars are no longer distant, limited, or short-lived; they have become imminent, widespread, and protracted.
The temporary ceasefire agreement between Washington and Tehran, which was supposed to lead to the reopening of the Strait of Hormuz, ended up as a double blockade, a severe blow to energy security and maritime trade, which represents 90% of the volume of global trade and 80% of its value.
The severity of the oil shock is still being underestimated. Although oil prices have risen by only about 50% compared to quadrupling in 1973 and doubling in 1979, the risk of stagflation looms. If the price of a barrel remains above $100, the global economy could enter a recession, with inflation reaching 6% annually and unemployment soaring.
Closing the Strait of Hormuz also leads to profound disruptions in supply chains, ranging from fertilizers and agriculture to aluminum, petrochemicals, semiconductors, and even the aviation and tourism sectors, with signs of shortages already emerging in Asia poised to spread globally.
On the financial front, Le Figaro continues, two serious gaps are emerging. The first is between the stock and bond markets, where stocks are benefiting from corporate profits bolstered by tax cuts and wage restraint, as well as bets on artificial intelligence and the postponement of passing on the cost of tariffs and rising energy prices to consumers. But this dynamic will sooner or later clash with weak demand.
In contrast, speculative bubbles are increasing in areas such as artificial intelligence, private credit, and digital currencies, which are valued at around $4 trillion, with particular exposure to emerging markets.
The second gap is the divergence between long-term interest rates, which are likely to rise, and short-term interest rates, which governments are trying to lower, even at the expense of the independence of central banks, as seen in the political control over the US Federal Reserve.
At the same time, the disintegration of the global economy is accelerating, both in terms of the widening gap between its major economic centers and the breakdown of trade and payment systems. The surge in oil prices has shifted the equivalent of 1.6% of global output from consuming to producing countries.
The United States, as the largest producer and exporter, benefits from these transformations, but in return it faces high inflation, rising unemployment, and a deterioration in its public finances, with a deficit of 6% of output and debt reaching 140%.
Le Figaro went on to say that the global economy is facing a cyclical crisis, and even the risk of total collapse, reminiscent of the atmosphere of the 1930s. With the rise of nationalism, the breakdown of the rules of international cooperation, and the transformation of strategic resources—from energy and food to technology and finance—into instruments of conflict, the world is moving toward a politicized and militarized economic system.
The economist John Maynard Keynes observed that “the difficulty lies not in understanding new ideas, but in freeing oneself fr
om the old.” Today, the era of Western dominance, US leadership since 191
7, and the world order established after 1945 appear to have come to an end.
In this context, Le Figaro notes that China seeks to present itself as a pillar of stability in the face of the United States' volatility. Europe, for its part, is called upon to undertake a strategic repositioning that guarantees its economic independence, boosts its production and investment, and balances the rule of law with competitiveness, ultimately consolidating its position as a resilient global power in a world increasingly characterized by chaos, Le Figaro states.
