The billionaire founder and CEO of Citadel Securities warns that a global and US recession is on the table if a critical waterway for oil shipments remains closed for an extended period of time.
In a new CNBC interview, Ken Griffin says oil prices will likely soar to unmanageable levels if Iran continues its blockade on the Strait of Hormuz, where about 20% of global oil shipments pass through.
“Unfortunately, we have yet to reopen the strait, and that’s going to take a period of time that’s just very hard to estimate or to determine. The upshot, if the strait remains closed for another six, nine, 12 months, energy prices around the world will go materially higher. It will push the world into a global recession.”
According to Griffin, the US is largely insulated from oil price shocks because it is a net oil exporter. But he warns that a global recession will ultimately hurt the US economy.
“So we end up in a global recession. Clearly, that’s going to hit US growth prospects and may push the United States into a recession. But of all the countries in the world, we will have one of the greatest stories of resilience.”
But for now, Griffin says the US stock market appears to be overlooking geopolitical concerns as investors focus on a strong earnings season.
“Look, the stock market’s looking at the incredible earnings success that American companies have enjoyed. Another great earnings period so far. American businesses across virtually every sector putting up record profits. The stock market’s very focused on the here-and-now success story being written across American firms.”
As of Thursday’s close, the S&P 500 is trading at an all-time high of 7,337.
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