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With the Iran war escalating, Nobel Prize-winning economist Paul Krugman is warning that the conflict could trigger a severe global economic shock.
“This is potentially really terrible,” Krugman said during an interview with MS NOW’s Chris Hayes when asked about the economic reverberations of the oil supply shock sparked by the conflict.
Crude oil prices have already surged about 56% over the past month (2). But Krugman suggested the current price may be underestimating the potential fallout, arguing that traders appear to be assuming the conflict will last only another week or two.
“If it goes on longer, then this is — 20% of the world’s oil flows through the Strait of Hormuz, and there’s really no other way for it to get to where it can be used,” he said. “That’s enormous. That’s a much bigger shock to world oil supplies than the oil shocks of the 1970s.
“This is just a gigantic disruption to world energy supplies, and the price can go easily much, much higher than where it is now if it’s sustained.”
Krugman isn’t the only one sounding the alarm. Qatar’s energy minister Saad al-Kaabi recently said that the conflict could “bring down the economies of the world” if it drags on and disrupts energy exports from the Persian Gulf. He predicted oil could surge to about $150 per barrel within two to three weeks if shipments are unable to move through the Strait of Hormuz.
Consumers are already feeling the impact. In the U.S., the average price of regular gasoline has climbed about 23% over the past month to $3.63 per gallon (4).
Krugman noted that while presidents are often blamed for rising oil and gasoline prices, “they have no influence on it normally.” This time, however, he said the situation is different.
“But start a war that threatens to cut off the world’s supply of oil — that’ll do it,” he said.
If energy markets remain disrupted, the ripple effects could extend far beyond gasoline prices. The oil shocks of the 1970s set off a period of simultaneous recession and inflation in the U.S. — a painful combination known as stagflation.
That said, history shows that savvy investors have often found ways to protect their wealth from inflation’s bite — even during periods of geopolitical turmoil and war.
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When it comes to preserving wealth and fighting inflation, few assets have stood the test of time like gold.
Its appeal is simple: Unlike fiat currencies, the yellow metal can’t be printed at will by central banks.
Gold is also considered the ultimate safe haven. It’s not tied to any one country, currency or economy and in times of economic turmoil or geopolitical uncertainty, investors often flock to it — driving prices higher.
Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, has repeatedly highlighted gold’s role in building a resilient portfolio.
“People don’t have, typically, an adequate amount of gold in their portfolio,” Dalio told CNBC last year (6). “When bad times come, gold is a very effective diversifier.”
More recently, he posted on X, “As for investing, sell out of all debt and buy gold because wars are financed by borrowing and printing money.”
Over the past 12 months, the price of gold has surged by more than 65% (8).
One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of Priority Gold.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, thereby combining the tax advantages of an IRA with the protective benefits of investing in gold, making it an option for those looking to help shield their retirement funds against economic uncertainties.
When you make a qualifying purchase with Priority Gold, you can receive up to $10,000 in precious metals for free.
Investing legend Warren Buffett has also weighed in on what wars could mean for your money.
“The one thing you could be quite sure of is if we went into some very major war, the value of money would go down — that’s happened in virtually every war that I’m aware of,” Buffett told CNBC in 2014 (9), the last time Russia invaded Ukraine.
“The last thing you’d want to do is hold money during a war.”
Buffett then offered guidance on what assets tend to hold up better during periods of conflict.
“You might want to own a farm, you might want to own an apartment house, you might want to own securities,” he said.
Real assets like rental properties tend to hold up when the value of money is eroded. When inflation rises, property values often increase as well, reflecting the higher costs of materials, labor and land. At the same time, rental income tends to go up, providing landlords with a revenue stream that adjusts for inflation.
In fact, Buffett has repeatedly pointed to real estate as a prime example of a productive, income-generating asset (10). In 2022, he stated that if you offered him “1% of all the apartment houses in the country” for $25 billion, he would “write you a check.”
Why? Because no matter what’s happening in the world, people still need a place to live and apartments can consistently produce rent money.
Of course, you don’t need $25 billion — or even to buy a single property outright — to invest in real estate. Crowdfunding platforms like Arrived offer an easier way to get exposure to this income-generating asset class.
Backed by world-class investors like Jeff Bezos, Arrived allows you to invest in shares of rental homes with as little as $100 — all without the hassle of mowing lawns, fixing leaky faucets or handling difficult tenants.
The process is simple: Browse a curated selection of homes that have been vetted for their appreciation and income potential. Once you find a property you like, select the number of shares you’d like to purchase and then sit back as you start receiving any positive rental income distributions from your investment.
For a limited time, when you open an account and add $1,000 or more, Arrived will credit your account with a 1% match
Another option is Lightstone DIRECT, which offers accredited investors access to institutional-quality multifamily and industrial real estate — with a minimum investment of $100,000.
Founded in 1986 by David Lichtenstein, Lightstone Group is one of the largest privately held real estate investment firms in the U.S., with more than $12 billion in assets under management.
Over nearly four decades, their team has delivered strong, risk-adjusted performance across multiple market cycles — including a 27.6% historical net IRR and a 2.54x historical net equity multiple on realized investments since 2004.
With Lightstone DIRECT, you gain access to the same multifamily and industrial deals Lightstone pursues with its own capital.
Here’s the kicker: Lightstone invests at least 20% of its own capital in every deal — roughly four times the industry average. With skin in the game, the firm ensures its interests are directly aligned with those of its investors.
At the end of the day, everyone’s financial situation is different — from income levels and investment goals to debt obligations and risk tolerance — which means the best move for someone else might not be the best move for you. And when the economic outlook is uncertain, those differences matter even more.
If you’re unsure where to start, now might be the right time to get in touch with a financial advisor through Advisor.com.
Advisor.com is an online platform that matches you with vetted financial advisors suited to your unique needs. They can help tailor a strategy to your particular financial situation, whether you’re looking to protect your wealth, generate income or plan for long-term financial security.
Once you’re matched with an advisor, you can book a free consultation with no obligation to hire.
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Huffpost/YouTube (1); Trading Economics (2, 8); Moneywise (3, 6); American Automobile Association (4); Energy History (5); X (7); CNBC/YouTube (9); CNBC (10).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
