Griffin Warns of Global Recession Amid Strait of Hormuz Closure
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CHICAGO (AP) — Billionaire investor Ken Griffin warned Wednesday that a global recession is imminent following the closure of the Strait of Hormuz, raising alarms about a potential stock market crash. The financial outlook darkened as elevated oil prices surged after retaliatory attacks between Iran and the United States and Israel disrupted critical energy shipments.
Griffin, founder of Citadel, stated that the blockade could persist for six to 12 months, creating severe supply chain disruptions across the global economy. The Strait of Hormuz serves as a vital chokepoint for international oil trade, with approximately 20 million barrels of crude passing through the waterway daily. Prolonged closure threatens to spike energy costs worldwide, impacting transportation, manufacturing, and consumer spending.
The warning comes as markets react to escalating tensions in the Middle East. Recent military exchanges have led to the temporary shutdown of the strait, a development that economists say could trigger a sharp contraction in global growth. Trevor Jennewine, chief investment officer at Morgan Stanley, noted that the situation presents unprecedented risks for equity markets, particularly in sectors heavily reliant on energy inputs.
Mark Zandi, chief economist at Moody’s Analytics, cautioned that the combination of supply shocks and rising inflation could force central banks to maintain higher interest rates for longer periods. This policy stance may further dampen economic activity, increasing the likelihood of a recession in the United States and other major economies.
Austan Goolsbee, chair of the Council of Economic Advisers, acknowledged the severity of the situation but emphasized the administration’s preparedness to manage energy security challenges. Goolsbee stated that the U.S. is coordinating with allies to ensure alternative supply routes remain open and to stabilize domestic fuel prices.
Despite these efforts, uncertainty remains high. Analysts are divided on the duration of the disruption and its long-term economic impact. Some predict a temporary spike in prices followed by a gradual return to normalcy, while others foresee a more prolonged downturn if diplomatic resolutions fail to materialize.
The closure has already sent oil futures to multi-year highs, with Brent crude surpassing $120 per barrel. Stock indices in the U.S. and Europe have experienced significant volatility, reflecting investor anxiety over the unfolding crisis. The S&P 500 and Dow Jones Industrial Average both recorded sharp declines in early trading Wednesday.
As the situation develops, policymakers and market participants are closely monitoring diplomatic efforts to reopen the strait. The outcome of these negotiations will likely determine the trajectory of global economic recovery in the coming months. For now, the threat of a recession looms large, with Griffin’s warning serving as a stark reminder of the fragility of the global financial system.