Global Nuclear Effects: Economic and Financial Fallout of Nuclear Use

In today’s world of global interdependence, the potential economic impact of nuclear weapons use is likely to be far more extensive than previously estimated. National economies rely on cross-border trade and investment, interconnected financial markets, digital infrastructure, and complex global supply chains.As a result, a major shock in a single country—especially something as consequential as nuclear weapons use—is likely to cause widespread cascading failures across the global economy.

At the same time, the risk of nuclear weapons use—whether intentional or through accident or miscalculation—is growing. Russia’s invasion of Ukraine and nuclear saber-rattling, China’s growing nuclear arsenal, and the United States’ ongoing effort to modernize and potentially expand its nuclear arsenal have raised challenging questions about the increasing role of nuclear weapons in regional and global security.This coincides with the rapid evolution of emerging technologies, which will continue to increase nuclear risks and make them more complex and unpredictable.

Despite the high stakes, the economic and financial considerations of nuclear weapons use remain underexplored. Experts have raised questions about whether the consequences of “limited” nuclear use would truly be catastrophic, overlooking the fact that a single ship stuck in the Suez Canal caused major disruptions to global trade, the COVID-19 pandemic shattered supply chains worldwide, and the Fukushima nuclear accident inflicted hundreds of billions of dollars in losses.

Evaluating low-probability, high-impact events remains inherently challenging. With only two cases of nuclear use in Hiroshima and Nagasaki, 80 years ago, profound uncertainty arises in assessing the likelihood of nuclear use and the full scope of consequences. Yet, with nuclear risks rising and the global economy more interdependent than ever, it is time to revisit this question with new urgency.

This paper examines several decades of research on economic and financial effects of nuclear weapons use, and explores the key gaps in our understanding of effects in today’s world.