Economist Nouriel Roubini, known for his pessimistic forecasts and nickname “Dr. Catastrophe”, suggested that while the US economy has a chance of a favorable “soft landing”, it is worth being wary of two serious threats that could lead to a recession.
The first concern is that if the economy continues to grow along with inflation, the Federal Reserve could raise interest rates again, which would tighten financial conditions and potentially trigger a recession. The second threat lies in the Middle East, where the escalating conflict between Israel and Hamas could spread to other countries, including major oil producers like Iran. This could shoot oil prices up by as much as 50%, causing a stagflationary crisis reminiscent of the difficult 70s.
However, the oil market, as well as the bond, stock and even gold markets, do not seem to be taking much into account the possibility of a deterioration in the Middle East.
Roubini does not rule out that a slight recession, although not very deep, may be ahead of us. But what is certain is that it is simply unreasonable to ignore such risks.
