Global governments lack the fiscal capacity to deal with the economic fallout of the Iran war, analysts warned.

The conflict’s consequences are still reverberating worldwide, and fears of stagflation are growing; several nations are rolling out measures to grapple with an expected cost-of-living crisis.

But most economies are still dealing with high debt-to-GDP ratios from the pandemic, Morgan Stanley economists warned, which “will limit the ability of governments to cushion the impact of elevated energy prices,” another analyst wrote in the Financial Times; the EU has urged member states to cap any support policies in time and scope. “The world has a fiscal space problem,” the IMF’s managing director said in an address yesterday.