An Iran War-Fueled Supply Shock Is Coming, Professor Warns
Markets aren’t prepared for the next spasm of economic turmoil brought on by the Iran war, Robert Pape, a professor at the University of Chicago, said over the weekend.
Pape, who writes The Escalation Trap newsletter on Substack, responded to news of the Strait of Hormuz blockade, writing that he believes the economic consequences of the war are about to expand far beyond the price of oil—and he says the effects will be felt in days.
“Within 10 days, parts of the global economy will start running short of critical goods,” he wrote in a post on X. “Not just higher prices – Shortages. Markets are not ready for this.”
Until now, global oil markets have been ground zero for war-related impacts, but Pape said the coming second stage he’s predicting will see economic conditions deteriorate as other products are disrupted more heavily, including fertilizer and plastics.
“Once inventories run down, this stops being about expensive inputs
It becomes about missing inputs,” Pape noted. “Factories don’t slow because costs rise. They stop because materials don’t arrive.”
He also added that America’s energy independence won’t spare the US economy from more pain to come, echoing other commentators who have said recently that the US isn’t isolated from the disruptions.
Michael Cembalest of JPMorgan Private Bank recently argued that despite Trump’s claims, energy independence won’t shield the US from energy shocks.
“When supply chains seize, the shock transmits via trade reductions,” Pape added. “This is the real shift: prices no longer determine outcomes. Access does.”
Pape advised investors to pay attention to one thing this week: if shipping flows resume through the Strait of Hormuz. He predicted that if maritime traffic doesn’t resume soon, the economic tightening will continue.
“By the time shortages show up in headlines, it’s already too late,” he warned. “That’s how these shocks work.”
