BlackRock CEO speculates on the Iran war outcome: if oil prices rise to $150, it will trigger a global recession

Cailian Press, March 25 (Editor Liu Rui) — Larry Fink, CEO of U.S. financial giant BlackRock, said that if the Iran war continues and oil prices remain high, it would have a “far-reaching impact” on the global economy. If oil prices reach $150 per barrel, it will trigger a global economic recession.

Fink also predicted two possible endpoints of this Iran war, and advised countries to be more pragmatic and diversified in their energy-structure choices.

What are the possible outcomes of the Iran war?

BlackRock manages assets worth $1.4 trillion, and is one of the largest investors in many of the world’s biggest companies. As one of the company’s eight co-founders, Fink has a unique perspective on the health of the global economy.

At present, the conflict in the Middle East has triggered extreme volatility in financial markets, and all investors are trying to assess how energy costs will change.

As for Fink, he said it is still too early to judge the final scale and outcome of this conflict. But he believes the ultimate result may come down to two options, a choice of either one:

First, the conflict is resolved and Iran becomes a country acceptable to the international community again, so oil prices could fall back to levels below what they were before the war;

Second, oil prices could remain above $100 per barrel for years, even approaching $150—this would have a far-reaching impact on the global economy and could lead to “a potentially severe and drastic economic recession.”

Solar and wind energy could benefit?

Given the high level of supply risk in oil, Fink believes that countries need to be more pragmatic when choosing their energy structures and make full use of all available energy resources. In addition, providing affordable energy is essential to driving economic growth and improving living standards.

“Rising energy prices are a very unfair tax. It affects poor people more than it affects rich people.”

He also said that if oil prices rise to $150 per barrel within the next three or four years, “then many countries will quickly shift toward solar energy, and possibly even wind power.”

The financial crisis won’t repeat

Some analysts think there are signs in today’s market conditions that are similar to the eve of the 2007–08 financial crisis: energy prices have continued to rise, and some have also noticed cracks appearing in the financial system.

For example, “the new bond king” Jeffrey Gundlach recently warned that the overall atmosphere in the private credit market is like the period before the 2008 financial tsunami. Gundlach said that the current private credit market faces huge redemption pressure and has extremely low overall transparency—almost identical to the high-risk debt collateralized debt obligation (CDO) bubble in 2007.

But Fink is confident that a financial disaster like that of 2007–08 will not repeat, because he believes financial institutions today are more resilient.

“I can’t see any (similarities to the eve of the financial crisis) at all,” he said plainly. “Zero.”

He also said that problems affecting certain funds account for only a small portion of the entire market, while investment by mainstream institutions remains strong.

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