The billionaire founder and CEO of Citadel Securities warns that a global and U.S. recession is on the table if a crucial waterway for oil shipments remains closed for an extended period of time.
In a new CNBC interview, Ken Griffin say Oil prices are likely to rise to uncontrollable levels if Iran continues its blockade of the Strait of Hormuz, through which about 20% of global oil shipments pass.
“Unfortunately, we have yet to reopen the strait, and that will take a period of time that is very difficult to estimate or determine. The result: if the strait remains closed for another six, nine, 12 months, energy prices around the world will rise significantly. 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 U.S. economy.
“So we are entering a global recession. Clearly this will hurt US growth prospects and could push the United States into recession. But we will have one of the greatest stories of resilience of any country in the world.”
But for now, Griffin says the U.S. stock market appears to be overlooking geopolitical concerns as investors focus on a strong earnings season.
“Look, the stock market is looking at the incredible earnings success that American companies have enjoyed. Another great earnings period so far. American companies in virtually every sector are posting record profits. The stock market is very focused on the here and now success story being written for American companies.”
As of late Thursday, the S&P 500 is trading at an all-time high of 7,337.
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