On Friday, Nouriel Roubini, the economist who called the 2008 financial crisis, cautioned that President Donald Trump is more likely to intensify the U.S. conflict with Iran rather than seek a quick resolution.
Trump May Choose Escalation Over Ceasefire
Roubini dismissed the notion that Trump is searching for an “off-ramp” to end the war, despite market optimism around a potential peace deal, he told CNBC at the Ambrosetti Forum in Cernobbio, Italy.
“If he chickens out right now, he loses credibility. He lost the war,” Roubini said, adding that such a move could hurt Trump’s chances in upcoming elections.
A Binary Outcome With High Stakes
Roubini described the situation as a high-risk, high-reward scenario.
On one hand, escalation — potentially including targeting key Iranian assets and intensifying military operations — could weaken Iran’s leadership and deliver a geopolitical win.
“My argument is that, counterintuitively, he’s going to decide to escalate,” Roubini said.
On the other hand, failure could trigger severe global consequences if Iran retaliates by disrupting oil flows through the Strait of Hormuz or targeting Gulf energy infrastructure.
Oil Shock Could Trigger ‘1970s Stagflation’
In a worst-case scenario, Roubini warned of a supply shock reminiscent of the 1970s oil crisis, potentially leading to stagflation — a mix of high inflation and weak economic growth.
“If you escalate and you don’t win, you end up with 1970s stagflation,” he said.
Currently, Crude oil futures jumped is at $101.18 per barrel, while RBOB gasoline futures gained 4.97% to $3.2859 per gallon and ULSD heating oil futures surged 7.36% to $4.5878 per gallon. Natural gas futures also advanced 2.73% to $3.081 per MMBtu.
Markets May Be Underestimating The Risk
While Roubini said his base case is slower growth rather than a full-blown crisis, he cautioned that investors may be too complacent.
“The question is whether the market is pricing in the tail risk,” he said, warning that a prolonged conflict could deliver a shock that markets are not fully prepared for.
Dow futures fell 920 points, or 1.99%, to 45,310.00, while S&P 500 futures dropped 127 points, or 1.95%, to 6,398.00. Nasdaq futures declined 540 points, or 2.27%, to 23,254.25 in late trading.
On Thursday evening, Trump said he would extend the halt on energy facility attacks by another 10 days to allow more time for peace talks, with the pause now set to expire on April 6.
Rubio: Iran Operations May End In Weeks Without Ground Troops
Meanwhile, speaking to reporters Friday after meeting G7 counterparts in France, Marco Rubio said U.S. military operations against Iran are expected to conclude within “weeks, not months.”
He added that Washington is confident it can achieve its objectives without deploying ground troops.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image via Shutterstock
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