The recent escalation of the U.S.-Israel war with Iran has reignited a debate among global economists: will this be the shock that delivers a global economic recession? While the conflict dominates headlines and energy markets, its ultimate impact on the economy is anything but certain. The post-Covid global economy has proven remarkably resilient, shrugging off shocks from surging inflation to the Ukrainian war and recent tariffs.

When faced with geopolitical turmoil, analysts often turn to history for templates, but the past is easily misread. The 1990 Gulf War, was the case where a surging oil price was the “last straw” for a global economy already enfeebled by the savings and loan crisis. However, the world’s largest economies at the time then used twice as much energy per unit of output than they do today. If we go further back to the 1970s Oil Shocks, these caused immense damage because inflation expectations were “unanchored,” allowing energy costs to pass directly into interest rates. Today, inflation expectations remain firmly anchored, meaning that the public and financial markets believe that inflation will eventually return to any central bank’s target (usually around 2%), regardless of temporary price spikes.

While the price of oil grabs headlines, the DURATION of the price move matters more than the peak level. Various]analysts have been suggesting that oil prices can spike to $200 or $300. Actually an oil price as those exorbitant high prices for a few days would be preferable to oil price at $150 for several months. Currently, financial markets offer a more tempered view: while near-term oil prices spiked by 40% or 50% the price for late 2026 moved less by around 25%. This suggests traders view the shock as a temporary interruption rather than a permanent shift to a high-price regime.

As business leaders navigate this latest shock, I believe they should adopt the below balanced mindset:

• Don’t Conflate Crises: Distinguish between geopolitical and macroeconomic crises; the former does not always lead to the
• Analyse, Don’t Predict: Instead of making unreliable forecasts, analyse the specific drivers of the shock and the transmission channels to your specific business
• Use History Prudently: Avoid being blinded by analogies. Differences between historical events are often more insightful than the similarities
• Think at the System Level: Recognise that resilience depends on the state of the economic system at the time of impact.
• Don’t Doom and Gloom: Avoid over-indexing on the darkest macroeconomic tales; scrutinise risks by asking why existing economic safeguards would fail
• Be Prepared, but remain positive: It is very important to prepare your business for whatever comes our way, but do not use this preparation as a way to spread negativity allover the place.

I believe business leaders in Malta, should focus on safeguarding their businesses by prioritising supply chain diversification to mitigate the “supply disruption” that is specifically hitting Mediterranean and European trade routes when the Strait of Hormuz is impacted. Moreover, since higher inflation can eliminate real wage growth and diminish consumer purchasing power, businesses should focus on operational efficiency to increase the possibility of absorbing certain rising costs without alienating the price-sensitive consumer segments. Furthermore, as the war influences global financial conditions and could push higher interest rates, business leaders would do well to strengthen liquidity buffers and reassess capital expenditure on projects that are highly sensitive to interest rates.