"Doomsday Doctor": Trump May Escalate Iran War — Potentially Triggering a "Stagflation of the 1970s"

Economist Nouriel Roubini said Friday that he expects Donald Trump to escalate the war against Iran, warning that it could trigger an inflation-stagflation crisis similar to the one in the 1970s.

“I think he will escalate this war,” the economist, known for predicting the 2008 financial crisis, said when speaking about Trump. “I think he will take ground action. I think Israel would want that as well. I think there are quite a lot of people inside the Trump administration, like (national security adviser) Michael Waltz and others, who want to escalate the war—not only against Iran, but also against the Houthis and other Iran-backed proxies.”

“If this happens, we’ll face a double blow: oil and natural gas prices will rise sharply,” Roubini added. “And Iran may also take action to shut down the Strait of Hormuz.”

Roubini said that since the end of last year, he has argued that for Trump and his team, going to war with Iran is more advantageous than reaching an agreement.

“The ‘honeymoon period’ from the war will continue, and they can use the war to secure their seats in the midterm elections and blame their own problems on wartime factors,” Roubini said. “So I think what we’re facing is not a short-term shock, but a long-term shock.”

He added that even if the U.S.-Iran conflict is resolved in April or May, the sanctions are “unlikely to be lifted quickly,” meaning that “oil and natural gas prices will stay high for quite a long time going forward.”

Roubini said inflation is expected to accelerate, and that “inflation expectations will deviate from the anchor,” leading to stagflation—an environment where high inflation coexists with high unemployment and slowing economic growth.

He warned: “We will face a 1970s-style stagflation risk, with a massive negative supply shock.” “The Federal Reserve is in a dilemma. If it tightens monetary policy, the economy will experience a hard landing. But if it loosens too early and too much, inflation will get out of control.” “I think the risk we face is that this war will escalate and continue, and the supply shock will be bigger and more persistent than they think.”

Late Thursday evening, Trump announced on his social media platform Truth Social that he will extend the pause on attacks on Iran’s energy facilities through April 6, while also saying that “negotiations are ongoing… and progress is going very well.”

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