"There will be a cold fall in the economy": Movchan on the risks of crisis due to the war in Iran

The war in the Middle East will not have catastrophic consequences for the world economy, said economist, founder of the investment management company Movchan's Group Andrei Movchan in an interview with "First Radio".

"There will be, if not winter, a cold economic fall in the world. But this is not a catastrophic situation," Movchan said. According to him, it is premature to talk about an economic crisis - more like a slowdown in global economic growth: "If the world GDP growth was planned up to 3%, it will be up to 1% in case of a protracted conflict. But this is not a catastrophe yet.

According to the economist, if the war and the blockage of the Strait of Hormuz drags on, in the long term the world will adapt to the new realities - for example, by creating new routes for oil transit and increasing production at other fields. But the world is not as dependent on oil now as it used to be, so oil prices are unlikely to reach records, Movchan said. The historical record was set in 2008, when the cost of Brent exceeded $147 - more than 20% higher than the peak cost of oil after the start of the Iranian war.

"Nevertheless, there will be problems [if the war drags on]. The high price of oil cannot help but increase inflation. Increased inflation leads to a delay in lowering rates where they should have fallen. In Europe, rates may even rise. Since rates and inflation are higher, the cost of money is higher. This will have a depressing effect on markets that were expecting the cost of money to fall soon. Especially in the markets of Southeast Asia - at the beginning of the year they soared sharply, bonds grew strongly. Accordingly, there may be a pullback here," says Movchan. - These pullbacks, which cause volatility, will cause problems for investors in general. And that could set off a chain reaction of fear. Investors may start leaving the markets.

But on the whole, the global economy is "very stable now, and it will withstand this war for a year, two or seven years," Movchan says. However, the impact of the war on different markets will differ. According to the economist's assessment, the U.S. economy can withstand the situation with virtually no losses. Europe, which is heavily dependent on Middle Eastern gas, will be worse off - ECB rate hikes and stagnation are possible. Southeast Asian economies, which are even more dependent on energy supplies, will feel bad. To keep an eye on the risks, investors should look at India, Movchan advises. The country is at its most vulnerable after the cutoff of oil supplies through the Strait of Hormuz, he says.

"We need to look at what is happening with India, with the domestic market, how it is, where it gets its oil from. Now America has already started issuing them licenses to buy sanctioned Russian oil, which shows that the situation is serious. And it is India that you and I will be able to determine how close the situation is to the problem," the economist said.

If the war drags on and causes tangible problems in economies, investor capital is likely to flow to the U.S., Movchan believes. "America is a relative beneficiary of this war. Americans are net exporters of energy, they are very far away from the conflict, their infrastructure is not suffering, and their military-industrial complex will definitely get new orders from around the world as a result of this campaign. It may not be very easy for them, but the Americans should come out of this war, as well as past wars, comparatively better than all other countries. So there are reasons why capital may move there," he said.

But overall, no one gains economically from the war, Movchan noted. "Everyone loses, some more, some less. Those who do not usually participate in the war benefit from it. But in today's war, almost everyone is directly or indirectly involved," he stated.

This article was AI-translated and verified by a human editor