Edward Yardeni, President of Yardeni Research, has expressed his perspective on the current Iran conflict and its potential repercussions on the global markets.
Yardeni, in an interview with CNBC on Tuesday, predicted a “short war scenario”, expecting the conflict to wind up in a few weeks.
“Iran has lost, however, they haven’t realized that yet, ” said Yardeni, adding that their command system has been “annihilated.”
He envisions an ideal scenario where the war concludes within the next month, leading to regime change in Iran, new policies, and a significant decrease in geopolitical risk in the Middle East.
Regarding the energy trade, Yardeni projected that in a short war scenario, oil prices would plummet sharply due to the surplus of oil. However, he warned that if Iran turns into a terrorist state, it could continue to pose threats to the global economy.
At the same time, he cautioned that a drawn-out conflict could trigger a spike in oil prices, potentially leading to inflation and economic depression. This could put the Federal Reserve in a tight spot, as it would need to strike a balance between hiking interest rates to tackle inflation and reducing them to stimulate a faltering economy.
Despite the uncertainties, Yardeni urged investors to stay with equities, considering that some of the sell-offs could offer investment opportunities.
Goldman CEO Surprised By ‘Benign’ Market Response
Yardeni’s predictions come at a time when the financial markets have shown a surprisingly “benign” reaction to the Iran war, as per Goldman Sachs‘ Chairman and CEO David Solomon. Speaking at the Australian Financial Review Business Summit on Tuesday, Solomon said that it may take a few weeks for markets to fully absorb the short- and medium-term implications of recent events.
On Tuesday, the Dow Jones Industrial Average slid 0.83%, the S&P 500 shed 0.94%, while the Nasdaq Composite closed 1.02% lower. The markets briefly looked up after President Donald Trump announced that the U.S. would offer insurance for tankers in the Persian Gulf to help restore maritime traffic through the Strait of Hormuz.
Meanwhile, JP Morgan analysts have warned that the prolonged closure of the Strait of Hormuz could drastically reduce crude oil supplies from Iraq and Kuwait within days. This situation could potentially lead to a cut of 3.3 million barrels per day by the eighth day if the Strait of Hormuz continues to be inaccessible.
When last checked, the WTI Crude futures were trading 0.56% higher at $74.94 per barrel.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.
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