The crises caused by the Iran war will hit the world in four waves

The third wave is the complex economic impact on the Global South. Advanced economies absorb energy and freight shocks through fiscal cushions, reserve currencies and diversified suppliers. Developing economies absorb them through import compression, currency depreciation, fertiliser rationing and hunger. Food accounts for 44 percent of household expenditures on average in low-income countries compared with 16 percent in advanced economies.

This is not a market outcome. It is a redistribution, a transfer of welfare from the world’s poorest households to commodity exporters and the financial intermediaries who clear, insure and finance the trade that survives.

No ceasefire addresses this redistribution. No framework agreement reverses it. The diplomatic instrument that ends a war is not designed to undo the economic transfers the war has imposed. The transfer simply settles into the system as the new baseline, and the next shock builds on top of it.

The fourth wave is political. Supply chain shocks do not stop at balance sheets. They damage social contracts. The Arab Spring was, in significant part, a wheat price shock translated into a political rupture. Sri Lanka’s government collapse took place after the pandemic compounded pre-existing foreign exchange and debt crises. Pakistan’s 2022-2023 unrest was the product of a balance-of-payments crisis worsened by the 2022 surge in global energy prices.

The Iran war’s downstream inflation will land on countries across the Global South that are already operating with depleted legitimacy reserves, narrow fiscal space and citizens who have absorbed shock after shock since the pandemic. Some governments will not survive it.

The instability that follows will then be analysed, in the usual way, as a failure of governance in the affected country rather than as the predictable consequence of a war that disrupted the global economy.

All this necessitates urgent action. Three measures could shift the burden distribution in a meaningful direction. The first is regional food and fertiliser reserves that should be held under the Organisation of Islamic Cooperation or G77 frameworks that are large enough to buffer 12 months of import disruptions for member states.

The second is a Global South war-risk reinsurance pool, mutualising exposure that is currently underwritten almost entirely in the West.

The third, and the most politically difficult one, is a structural reform of how the International Monetary Fund (IMF) treats war-induced shocks. Currently, it classifies them as policy failures of the borrowing country, which then must accept conditionality designed for fiscal mismanagement rather than for exogenous shocks it had no part in causing.

The institutional vocabulary for a different approach already exists: The IMF’s Catastrophe Containment and Relief Trust, used during the COVID-19 pandemic; the historical Exogenous Shocks Facility; and the Resilience and Sustainability Trust all treat externally originated shocks as warranting rapid liquidity with minimal conditionality. Extending the same logic to war-fallout cases is an architectural extension, not an invention. The reform required, therefore, is less institutional than political.

None of these is on any negotiating table. The architecture of recovery, like the architecture of war, is being designed by the parties least exposed to its consequences.

The framework peace agreement, when it comes, will be photographed, signed and described as the end of the war. It will be the end of the war only for those who fought it. For the economies on whose backs the bill is being written, the war would be just beginning.

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.