The founder and CEO of hedge fund Citadel, Ken Griffin, is warning that the global economy is at risk amid the Middle East conflict.
In an interview at the Semafor World Economy Summit in Washington, D.C., Griffin says the Iran war has triggered an “energy crisis” that could cause severe harm to the global economy.
“That, [energy crisis] of course, will create demand destruction. It will cause economies across the world to decelerate. The risk of a recession has increased and central banks are making some really difficult decisions. Is the inflationary spike that this will create, will they view that as transitory and leave monetary policy as is? Or will they view themselves as having to have to raise rates to try to keep inflation expectations well anchored?
So this really is a very, very treacherous moment for the world economy as we navigate the consequences of trying to secure a lasting peace in the Middle East.”
If the Strait of Hormuz, which Iran closed by threatening ships sailing through it after the US and Israel launched a war against it remains unnavigable over the coming months, Griffin says,
“I mean, let’s assume it’s shut down for the next 6 to 12 months. The world’s going to end up in a recession. There’s no way to avoid that.”
Griffin, however, says a continued contraction in the supply of crude oil and natural gas as a result of the Iran war could boost alternative sources of energy.
“We’ll see a rapid shift towards alternative fuel sources. We’ll see wind. We’ll see nuclear. We’ll see solar. We’ll see huge pushes to reduce dependencies on fossil fuels. But that’s measured in years, not months. So, we are going to see an acceleration of some of the historical trends that have played out over the last 10 years as the world rapidly tries to move away from fossil fuels if we lose that very dependable source of fuel, being the Middle East.”
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