Finance minister Nirmala Sitharaman on Monday warned that the ongoing war between US and Iran has moved far beyond a regional security concern and now poses risks to the global economic system, describing it as a “systemic tremor”.
Addressing the golden jubilee event of the National Institute of Public Finance and Policy in Delhi, Sitharaman said the evolving crisis threatens critical global energy supply routes and is reshaping geopolitical alignments.
“The escalation of the Middle East conflict has evolved from a regional security concern into a systemic tremor, threatening the vital arteries of global energy and hardening the lines of a new, multipolar world order,” she said.
She underlined that the global economy has entered a phase of “permanent volatility”, moving away from a period marked by isolated shocks. “The current year is even more challenging as we move from a landscape of ‘shocks’ to one of ‘permanent volatility’,” Sitharaman noted.
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Describing the broader global situation, she said the present reality is best captured by a world defined by “volatility, uncertainty, complexity and ambiguity all at once”.
Disruptions that have hit global economy
The finance minister pointed to a series of disruptions that have reshaped the global economy in recent years — from the COVID-19 pandemic to the Russia-Ukraine war, rising tensions in the Middle East, and trade uncertainties linked to policies under former US President Donald Trump.
Reflecting on the past year, Sitharaman said 2025 turned out to be more significant than expected, with trade fragmentation disrupting supply chains and forcing downward revisions in global growth forecasts, even though the year ended on a relatively optimistic note for India.
She also flagged mounting global debt as a key concern. Citing data from the International Monetary Fund, Sitharaman said public debt has surged to about $106 trillion, exceeding 95% of global GDP. The United States’ debt-to-GDP ratio is projected at 125% in 2025, while Japan’s stands at 235%.
According to her, many advanced economies now face limited fiscal space after years of expansionary policies, constraining their ability to respond to fresh economic challenges.
In contrast, Sitharaman highlighted India’s relatively strong macroeconomic fundamentals. India’s general government debt-to-GDP ratio stands at about 81%, among the lowest for major economies after Germany, and is projected to decline further to 75.8% by 2030.
She added that India’s external debt-to-GDP ratio remains low at 19.1% as of September 2025, while foreign exchange reserves have crossed $688 billion as of March 31, 2026 — enough to cover around 11 months of imports.
US-Iran war rages on
The conflict continues to intensify with no immediate signs of de-escalation. US President Donald Trump has issued a deadline to Iran to reopen the Strait of Hormuz, warning of possible strikes on key infrastructure such as bridges and power plants if Tehran fails to comply. The deadline ends on Tuesday
Iran has rejected a 45-day ceasefire proposal, insisting instead on a permanent end to the war with guarantees against future attacks.
The United States and Israel carried out fresh strikes on Iran on Monday, reportedly killing more than 25 people, while Iran retaliated with missile attacks targeting Israel and Gulf countries.
The US military has struck over 13,000 targets so far, according to Central Command, underscoring the scale of the ongoing conflict.
Meanwhile, tensions have spread across the region, with missile alerts regularly sounding in Bahrain and the UAE amid fresh Iranian barrages.
Global concerns over escalation
The war has also triggered international concern. The United Nations Security Council is set to vote on a revised resolution aimed at reopening the Strait of Hormuz, a critical route through which nearly one-fifth of global oil supply passes.
World leaders have urged restraint, with countries like New Zealand warning that threats targeting civilian infrastructure could worsen the crisis and calling for urgent de-escalation.
