How the World Trade Organization can help defuse the current US-Israel-Iran conflict
The fallout from the current US-Israel-Iran war is both global and acute, with immediate consequences for energy markets, trade flows, and economic stability. This creates a clear role for international organizations, such as the World Trade Organization (WTO), to help contain and discipline the economic disruption, even though the ultimate resolution of the conflict rests with the governments of the warring parties.
At the time it unfolded, World War I was known as “The Great War” due to its unprecedented scale and destruction. Yet within two decades, an even more devastating conflict emerged. While the origins of the First World War lay primarily in militarism, nationalism, and imperial rivalry, the Second World War was shaped in part by economic fragmentation. In particular, the beggar-thy-neighbor protectionist policies adopted during the interwar period deepened global economic stress, amplified geopolitical tensions, and contributed to the conditions that drove states such as Germany toward aggressive expansionism.
Following the end of the war in 1945, the international community deliberately constructed an institutional architecture aimed at preventing economic conflict from spilling into military confrontation. The flagship pillars were the International Monetary Fund and the World Bank. Alongside them, a parallel track focused on trade: beginning with the General Agreement on Tariffs and Trade (GATT) in 1947 and culminating in the establishment of the WTO in 1995. This system was explicitly designed to discipline state behavior, reduce economic coercion, and channel disputes into rules-based processes rather than escalation.
Together, GATT and the WTO have reduced the risk of conflict by channeling trade disputes into rules-based, non-violent resolution mechanisms. A prominent example is United States – Import Prohibition of Certain Shrimp and Shrimp Products, where tensions over environmental restrictions on imports from Asian countries were resolved through WTO adjudication and subsequent policy adjustments rather than escalating into broader confrontation. More broadly, by providing a predictable legal framework and a credible dispute settlement system, these institutions have constrained states’ ability to resort to unilateral retaliation or coercion, helping to contain trade frictions before they spill over into wider geopolitical conflict.
The origins of the current US–Israel–Iran war are not primarily economic, but its consequences are increasingly so – and they are driving escalation. The United States and Israel have targeted Iran’s energy infrastructure to exert pressure, while Iran has responded in kind by targeting energy assets in the Arabian Gulf. More critically, Iran is effectively restricting passage through the Strait of Hormuz, intensifying the global energy shock and raising the risk of a severe, prolonged downturn in the world economy.
The WTO is not designed to resolve military conflicts, and its formal processes are neither rapid nor directly enforceable in a crisis of this nature – particularly when states invoke national security exceptions. However, this does not make it irrelevant. Its real value lies in its ability to structure and coordinate the economic response of its members, providing a rules-based framework through which states can collectively respond to systemic trade disruptions without descending into uncoordinated retaliation.
Although some affected countries may look to the WTO as a means of holding Iran accountable for restricting passage through the Strait of Hormuz, the Organization’s role is necessarily indirect. Iran is not a full WTO member and is therefore not subject to its dispute settlement system, and restrictions on a strategic maritime chokepoint sit primarily within the domains of maritime and security law.
However, this does not render the WTO irrelevant. Rather, it shifts its function: instead of adjudicating Iran’s behavior directly, the WTO provides a framework through which its members can coordinate their economic response. In practical terms, this could include jointly notifying and justifying emergency trade measures under WTO rules, aligning restrictions on sensitive exports, such as refined fuels or dual-use technologies, and using WTO committees and councils to ensure transparency and consistency across countries’ policies – as seen during the COVID-19 pandemic, when members used WTO processes to manage widespread export restrictions on medical and food products. By embedding these actions within a multilateral framework, member states can apply pressure on Iran in a coordinated and sustained manner, while reducing the risk of legal challenges or fragmentation among themselves.
The WTO also plays a critical role in managing the broader systemic consequences of such a shock. In a rapidly deteriorating trade environment, uncertainty itself becomes a destabilizing force, as governments and firms react to incomplete information about supply disruptions and policy changes. Here, the WTO’s transparency and monitoring functions are central: through notification requirements, committee oversight, and regular information-sharing, it provides visibility over members’ actions and intentions. This reduces uncertainty, tempers panic-driven responses, and helps anchor expectations among major trading economies. By stabilizing the informational environment, the WTO limits the risk that the crisis escalates into a wider breakdown of the global trading system, ensuring that responses remain measured rather than reactive.
Ultimately, the WTO cannot broker a ceasefire or redraw the security architecture of the Middle East. However, its importance lies elsewhere. By providing a rules-based framework for collective action, it enables the world’s major economies to coordinate their response to disruption – disciplining their own behavior while applying sustained economic pressure outward. In a conflict defined by the weaponization of energy flows, this capacity is not merely technical; it is strategic. If effectively leveraged, the WTO can ensure that the response to disruption is coherent and consequential, raising the economic costs of continued escalation, while preserving the integrity of the global trading system. In doing so, it helps ensure that once the conflict subsides, the foundations of global trade remain intact.
Dr. Omar Ahmad AlUbaydli, Studies and Research Director
