WASHINGTON, June 17 (Reuters) – Rising inflation and a 30% jump in oil prices are hurting global growth, but leaders of the world’s major economies are unlikely to blame U.S. President Donald Trump for the war-driven slowdown when they meet in France to discuss the economy on Wednesday.
G7 leaders, already shaken by US tariffs and conflicts over the North Atlantic Treaty Organization (NATO) and Greenland, publicly criticized Trump’s decision not to consult them before the US and Israel began war against Iran in late February, while warning about the likely economic repercussions.
The US and Iran announced over the weekend that they had reached an agreement to cease fighting and reopen the Strait of Hormuz, sparking a wave of optimism in global markets.
But the war’s impact on the global economy is already evident: it has triggered a sharp rise in energy prices, renewed inflationary pressures and raised concerns about a serious food supply crisis in developing countries. Central banks adopted more restrictive measures, with the European Central Bank and the Bank of Japan raising interest rates last week to avoid an even more pronounced inflationary impact.
British Prime Minister Keir Starmer said he was “fed up” with the impact of the conflict on energy bills, and Italian Prime Minister Giorgia Meloni warned of the economic and social consequences of the war. The price rise also hurt the approval ratings of Starmer, German Chancellor Friedrich Merz and French President Emmanuel Macron.
However, the leaders largely set aside discussions about the economic impact of the war during this week’s G7 meeting out of a desire to avoid a confrontation with Trump, whose cooperation they need on issues ranging from Ukraine and NATO to trade.
The result, according to analysts, is that the G7 — created after the 1973 oil shock to help manage economic crises — is now shying away from the world’s main economic challenge, which could undermine its own relevance.
“US policies have harmed global economic activity,” said Marcello Estevão, chief economist at the Institute of International Finance.
“We have a country with the largest economy undermining what could have been a collaborative G7 agenda,” he said, adding that G7 leaders need to reinforce the group’s relevance at a time when emerging market economies — which are not part of the group — represent a larger share of the global economy.
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France, in its capacity as president of this year’s G7 and committed to avoiding conflict, has preemptively rejected any attempt to issue a comprehensive final declaration and is focusing instead on statements on more specific issues such as global imbalances, supply chains for essential minerals and the reorientation of development aid towards more investment-oriented programs.
(Additional reporting by Maria Martinez in Evian-les-Bains)
