"Prolonged Strait of Hormuz Blockade Could Trigger Asia-Led Global Recession"

[The Financial News]


Kenneth C. Griffin, the chief executive of Citadel and a Wall Street veteran, warned on the 14th (local time) about the possibility of a global recession. He said a worldwide downturn would be unavoidable if the Strait of Hormuz remains blocked for another six to twelve months. Griffin cautioned that the downturn would likely start in Asia.
According to CNBC, he issued this warning in a speech at the Semafor World Economy Conference held in Washington, D.C. that day.
Griffin said, "If we assume that the Strait of Hormuz remains blocked for the next six to thirteen months, the world will ultimately fall into a recession." He added, "There is simply no way to avoid that."
He predicted that if a recession is triggered by a shortage of fossil fuels caused by the blockade of the strait, there will be a massive shift toward alternative energy sources such as wind, solar, and nuclear power.
However, he partly defended the United States’ war against the Islamic Republic of Iran. Griffin argued that if Washington had delayed its attack until Iran’s military capabilities had grown further, the outcome of the current war would have been far worse.
Recently, stock markets have been rising on expectations that the United States and the Islamic Republic of Iran could reach a cease-fire agreement.
That does not mean the risks have disappeared.
Many analysts point out that the risk of an escalation in the war with the Islamic Republic of Iran has not been priced into the markets at all.
Asia’s economies, which serve as the world’s manufacturing hub and therefore rely heavily on imported energy, remain vulnerable to high oil prices that are still hovering near $100 a barrel.
Daniel Yergin, vice chair of S&P Global, also warned at the conference that, as Griffin noted, if logistics through the Strait of Hormuz are completely cut off for an extended period, the global economy could enter a chain of recessions starting in Asia.

dympna@fnnews.com Song Kyung-jae Reporter