Mariano Browne
There is growing alarm over the unclear endgame in the US/Israel-Iran war. While the US and Israel control the skies, this does not stop Iran’s missiles or its influence over the Strait of Hormuz. The campaign was expected to showcase US military supremacy. Iran has responded with an asymmetric war of attrition aimed at neutralising US military and political power, destroying facilities in surrounding states housing US bases. More than 20 per cent of the world’s oil and gas, and over 30 per cent of petrochemical inputs for many industrial and fertiliser applications, must pass through the Strait. This enables Iran to pressure financial markets and the global economy by limiting shipping.
According to Al Jezeera and the BBC, who are accessing open-source tracking systems (Automatic Identification System (AIS) data platforms, satellite imagery analysis, and maritime intelligence tools), between 1,900 and 2,000, commercial vessels were stranded. Because of the complexity of international logistics, each day brings new discoveries of vital inputs affected by this traffic delay. Daily vessel traffic in the Strait is reduced to a trickle (five-ten ships) compared to normal (100 to 120) ships a day.
By damaging the infrastructure in surrounding states, which produces the oil, natural gas and intermediate products without which the industries cannot survive, Iran has weaponised the performance of financial markets and negatively impacted global economic growth. Consumers everywhere are affected; energy is at the base of modern civilisation. The war is now in its fifth week. The longer it persists, the greater the impact on every country, including those not party to the war.
To mitigate the negative impact on financial markets, President Donald Trump has attempted to reassure the market by saying either that the US has already won the war or that Iran is begging for a deal. Trump intensifies his threats against the Iranian regime on weekends when markets are closed and hints at impending peace initiatives when markets are open.
Last week, President Trump first gave Iran a 48-hour deadline to allow ships free passage through the Strait, failing which Iranian civilian infrastructure would be obliterated. This deadline was then extended to five days on March 23, and then extended by an additional ten days on March 26. Iran’s response to the deadline and continued aerial bombardment has been to repeatedly strike US interests in neighbouring Gulf states.
Trump has said Iran is begging for a deal and that negotiations have been constructive, which Iran denies. The US has shared a 15-point plan with Pakistan, making Pakistan an interlocutor. Trust is necessary for negotiation. However, the US proposals resemble its pre-war stance, making real negotiation unlikely. Worse, the US attacked Iran while using diplomacy as a cover, both during talks in June 2025 and again on February 28.
Indeed, the Ayatollah and the Iranian leadership were killed at a meeting arranged to adjust their proposals arising from the previous day’s negotiations. The US use of Pakistan as an interlocutor can be viewed as a delaying tactic, an attempt to calm financial markets, whilst the US adjusts its military plans. More troop deployments (10,000) to the Gulf region were announced on March 27.
The world can expect more difficult conditions the longer this war continues. Bloomberg News reported on an investment bank giving a 60 per cent probability of the war ending by the end of March and a 40 per cent probability by the end of June. The IMF’s preliminary assessments indicate that the war in Iran has introduced significant volatility to the global economy, primarily through surges in energy prices, trade disruptions, and financial market volatility.
The prolongation or escalation of hostilities will result in permanent damage to Gulf energy infrastructure, which will take many years to repair. This will result in long-term economic dislocation, elevated fuel, electricity and transportation costs. This would be a catastrophic outcome for the Caribbean and other highly indebted developing nations. Globalisation has ensured that the world is economically interdependent, as are its supply chains.
The economic and social impact has been clearly demonstrated by the emergency measures taken by India, Bangladesh, the Philippines, and Sri Lanka. Despite US self-sufficiency in oil and gas, fuel prices at the pump have risen by 34 per cent since February 27. The Caribbean is not immune. Finance Minister Davendranath Tancoo has assured the public that the Government does not intend to increase fuel prices at this time, despite rising costs of imported energy products driven by escalating tensions in the Middle East.
The operative words are “intend” and “at this time”. Minister Tancoo characterised the current global market surge as a “short-term blip”. Like Trump, Minister Tancoo is popularising the most optimistic view. The full impact of the economic repercussions has not yet shown up in the numbers. That is the only “short-term blip”.
Meeting the new payroll arrangements, let alone meeting backpay obligations to all public sector unions, is proving to be very difficult for the Ministry of Finance. VAT refunds have again slowed, prompting renewed private-sector complaints and demonstrating that the Government’s cash flow is under pressure. Since government accounts are prepared on a cash basis, nonpayment of backpay will make the deficit look smaller and therefore more manageable.
Minister Tancoo’s options are limited. Delay and promise payment and hope that energy prices remain high until Manatee comes on stream. Will that be enough to put T&T on a sustainable growth path?
Mariano Browne is the chief executive officer of The UWI Arthur Lok Jack Global School of Business.
