Nouriel Roubini in conversation: Insights on Iran war, oil shockwaves, AI boom and more

Roubini Macro Associates Chairman & CEO Nouriel Roubini talks about ending the Iran war through escalation and regime change, why he doesn't predict a US and global recession and the "tug-of-war" between stagflationary events and growth from the global tech boom. He speaks to Bloomberg's David Ingles at the Greenwich Economic Forum in Hong Kong..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..Watch here.Listen here.Edited transcript of the interview.00:00 – David InglesGood morning. Good — almost afternoon. Thank you for joining us today. For those of you who flew in, thank you for taking the time.By the way, just as a note, Keina, our wonderful emcee today, used to be our producer for The China Show. So there we go — just a shout-out.So I didn’t prepare anything, and that’s not for lack of trying or because I woke up on the lazy side of the bed today. It’s just that being in the news business, this cycle has taught me not to prepare for anything.In fact, going into the weekend, we were heading into these big talks in Pakistan between the two sides. We were also coming off, I think, the best week for emerging-market stocks since the pandemic. So you have to go six years back to see the type of week equity markets had last week. And you were kind of thinking: was there too much downside if people buy in? Was Nvidia trading at 20 times earnings something you never thought you’d see, but we did?Then we came out of the weekend, the talks failed, and we were preparing our rundown for shows today. And as we went into that rundown, looking to talk about failed talks, the US then came out and said they were going to do a complete blockade of the Strait of Hormuz by 10 a.m. Eastern Time Monday. So from the current time, that’s about 10 hours from now.So we then had to scramble and figure out how to talk about a naval blockade in this day and age. That’s just to say there are many moving parts, and I think we’re dealing with scenarios now.And on that note, let me bring in, of course, famed economist Nouriel Roubini. I had the pleasure of chatting with him on the same stage this time last year. I don’t know where to start. How do you think this ends?00:02:22 – Nouriel RoubiniWell, the honest truth is no one knows how it ends. As you pointed out, you can only do scenario analysis. About two weeks ago, I wrote that there are two options. One is de-escalation and the other is escalation.The argument for de-escalation was that Israel and Trump made two mistakes at the beginning of the war. One, believing that the initial decapitation of the leadership of the country would lead to regime collapse. Two, the belief that, as in June of last year, Iran would be either unwilling or unable to block the Strait … and threaten GCC countries in the Gulf.Given those two mistakes, people say Trump is going to lose the midterms. He has to blink, he has to chicken out — again, TACO — and he has to de-escalate.The problem with de-escalation was that the two sides are so far apart that you cannot reach a deal. And if you don’t reach a deal, and he doesn’t do anything else, what happens? Iran controls the Strait of Hormuz. Yes, the market rallies as a sign of relief and the war goes into ceasefire, but oil prices are going to be higher than otherwise. Iran is going to be in a permanent position to threaten energy and anything else in the Gulf. They can rebuild drones … and become a permanent threat. And the deterrence of the US to credibly support its friends and allies — whether those in the Gulf, in Europe or in Asia — is damaged. How are you going to credibly deter China? Your friends and allies like Japan, South Korea, the Philippines, Taiwan and Australia — you name it. So it’s a strategic disaster.So my argument was that, having made the mistake of starting the war, at this point it is better to escalate, because if you do escalate and eventually force the regime to surrender, you have a political win and also a geostrategic win.The risk of escalation is, of course, even worse: oil prices go to 150, 200 … the Strait of Hormuz is shut, the Iranians attack the energy facilities of the Gulf, and then you end up with 1970s-style stagflation. I’m old enough to remember 1973 … the tripling of oil prices, or 1979, and two nasty stagflationary recessions in ’74–’75 and ’80–’82.So in my view, you have no option but to escalate until you eventually win. Now, there are two ways of doing that. My view was that the way to make it work was to take over Kharg Island, send troops to the islands around the Strait of Hormuz, try to open the Strait, support allies with more Patriot and THAAD missiles in the Gulf, and every day kill more of the … leadership. In two months, maybe you win. Maybe for two months oil is at 120, 130, 140, then they are forced to de facto surrender — de facto regime collapse.But that implies putting US troops at risk. The problem with the blockade is that, yes, you’re blocking it — saying nobody can get in or out — but that makes it even worse than it is right now. No traffic. So you get the spike in oil prices. You’re strangling the regime financially — that’s true — but the regime has shown itself willing to suffer even for years. Look at the decade-long war between Iran and Iraq. And if you strangle them, they can hit GCC energy facilities, the East-West pipeline of the Saudis, and so on. So you’re not resolving anything. If you want to escalate, you have to do it the hard way. Doing it the easy way is not going to work. It is going to be a tit-for-tat between the two, the regime doesn’t collapse, and then we’ll see what happens next.00:07:41 – David InglesIn what form do you think the escalation will happen? Because the reason I ask that is there’s a big difference between troops on Kharg Island and troops going into Tehran. And I can only imagine markets reacting quite negatively to both, but certainly a lot more so to the latter. And in whatever escalation we are likely to see, do you think that achieves a strategic objective on the part of the US? And what is that strategic objective?00:08:15 – Nouriel RoubiniWell, I don’t think you’ll have troops on the ground on Iranian soil. I think that if you want to make an argument for escalation, you need troops on the ground on Kharg Island to take it over and strangle the revenue of the regime. You need also troops on those islands that are next to the Strait of Hormuz to try to unblock it, de-mine it. Of course, they continue to send rockets and drones, but you can try to block them and send enough Patriot and THAAD systems to the Gulf to try to protect them.So that’s troops on the ground, and certainly not going into Tehran. I think that combined strategy, together with bombing day in, day out — Israel and the US — and killing more of the leadership, in a couple of months is likely to lead to either regime collapse or regime surrender, because you strangle them economically, financially and militarily.I think that’s a form of escalation that, in the short run, leads to oil prices being higher, stock markets being lower and bond yields being higher. But you get the job done. Maybe it was a mistake to start this war, but leaving it midway like this is a strategic disaster — not just for Israel or the Gulf or the US, but also for Europe and China and Asia, because Iran controls Hormuz, can decide forever who gets in and who gets out, and there’ll be other wars of one sort or another. They proliferate with nuclear capability, with more missiles and more drones. It’s a nightmare.So maybe it was a bad idea to start the war, but on condition of having started it, you have to finish the job. And finish the job means getting regime surrender.Instead, they don’t want to do it this way because they don’t want to put any troops even on the islands. So they’re trying to achieve the same result of strangling the revenues of the regime by doing a blockade. When you do a blockade, you strangle them economically, but they’re not going to surrender any time soon. And if you don’t restart the war by bombing the hell out of them — military infrastructure, more of the leadership of the country, trying to take over the island of Hormuz to de-mine it and open it up — then the blockade by itself is a game of chicken, and it’s a game of chicken that I think Iran eventually wins because they can suffer for a while.While there are political costs and economic costs to a slow-motion strangling of the regime, you know, it took decades for financial and trade sanctions in places like Zimbabwe to eventually contribute to regime collapse. So economic and financial sanctions, and blockades, don’t get you what you want. Unfortunately, you have to do something more risky. If there are troops and people die, that’s the cost. But if you’re not willing to do it, then you’re not going to succeed.So then it’ll be a half-baked escalation and you don’t achieve your results. And we’ll be in a worse world because you still have higher oil prices, stock markets falling, bond yields higher, consumer and business confidence falling, more global growth slowdown, higher inflation for longer — and you don’t even achieve the result. So a half-escalation is not the way to do it.00:11:46 – David InglesHow does President Trump and his team deal with several fallouts? One is the relationship between the US and its allies, not just in the Asia-Pacific but across the world, who are effectively having to foot the economic bill of this war in the form of high prices. You just have to look at countries like Bangladesh or the Philippines, which have no direct — perhaps not even indirect — involvement in the war, and even that is a stretch. How does the US then come out of this and mend ties and trust with its allies across the world?00:12:29 – Nouriel RoubiniWell, as I said, probably starting this war was a mistake and there were a couple of strategic miscalculations. And because of that, with the spike in oil prices, growth would be lower and inflation would be higher. And the longer the war lasts, the longer the Strait of Hormuz is blocked, the more damage there is to the oil production or export facilities of the Gulf, the bigger the negative impact on growth and the higher the inflation.And of course the biggest victim is Asia, because for Asia this is not just a price shock but also a quantity shock, because most of that energy from the Gulf goes to Asia. So at some point there is really a production shock. In Europe it’s more of a price impact, because Europe is a net importer of oil — less of a quantity impact, apart from some natural gas — but still a significant impact on inflation and growth, less than for Asia. And of course the US, being a net energy exporter, gets a more positive terms-of-trade effect, but it’s still negative overall because those who consume energy — households and firms — are worse off, while the energy-producing US gets a windfall gain and is not necessarily going to produce or invest more. So you still get some slowdown in growth even in the US and some increase in inflation.And he already had falling popularity because of the affordability crisis. So even if the impact on growth and inflation is more modest than in Europe, and in Europe less than in Asia, still it looks unpopular and looks like a war he has not won.So if there is damage done to friends and allies — and not just through this war, but through his overall attitude in the Western Hemisphere, in Europe and in Asia — then even if in Asia things become slightly more constructive with China, maybe because China had him in a chokehold over critical minerals, at least with China there was some defrosting of the relationship.But my point is that, given the damage you have done overall to your relationships with different kinds of friends and allies — whether in the Western Hemisphere, Europe, the Middle East or Asia — you have to maintain your credibility and deterrence against their foes, whether it is China, Russia, North Korea or Iran. And if you want to credibly say, “I’m going to support my allies,” once you have started the war, you have to finish the job. Even if finishing the job implies significant economic cost, military cost and even troops dying, you have to take that risk. If you don’t take it, then you have lost.If you de-escalate — or you escalate, but not in a way that leads to regime surrender — then in my view that is not just bad for the US or Israel or the Gulf. I said the biggest beneficiaries of actually finishing the job are going to be China and Asia, because most of the oil from the Gulf goes to China and Asia. Being in a situation where Iran has a chokehold on that oil, and any time in the future they can rebuild their weapons, strangle supply, extract tolls and so on, is something that should not be acceptable to China or to Hong Kong or to Japan or India or anybody in Asia, because they are actually the biggest victims of having an Iran that is a rogue state and a threat.And it’s not just Hormuz. The Houthis can also block Bab el-Mandeb, like they did during the war between Israel and Hamas. So any civilised country in the world should not want a situation in which a rogue, radical, extremist, fanatic regime — which has been a curse to its own people for the last 47 years — has a chokehold on 20% of the energy in the world. That should not be acceptable to anybody, and it should be in everybody’s interest to make sure that doesn’t happen.00:17:09 – David InglesSo let’s say they do succeed. Where does that leave Iran’s relationship — assuming we do get some form of regime change — with its GCC neighbours? Because they’ve been bombing each other as well.00:17:26 – Nouriel RoubiniYou know, I don’t know if there’ll be a real regime change. Many people in Iran would like a total regime collapse and some form of democracy. Some people like the idea of the return of the monarchy, with a crown prince and so on. That’s probably unlikely.But I would say that the current regime right now is even more radical than the one run under Khamenei before, because the son is actually more radical, more extremist. And the factions now in power are even more extremist because of what Israel and the US have done. Their view is that now their weapons are blocking Hormuz and bombing energy facilities in the Gulf. Even if Saudi said, “We are neutral,” and tried to engage Iran in negotiation and diplomatic relations brokered by China, all of that meant nothing. Once the war started, the Iranians went after Saudi, after Oman, after Kuwait, after Bahrain, after even Qatar, after Turkey, after Cyprus and so on.And by the way, their ballistic missiles — 4,000 kilometres — can reach anywhere in the European Union as well. So these are threats not just to Israel or the Gulf, but to all of Europe.So you have a regime that is even more radical than before, and that has effectively taken over a key source of global energy leverage. If a rogue regime were to take over the Strait of Malacca and say, “China, none of your imports or exports can pass from here any more,” would that be acceptable? It’s the equivalent of something like that.So my point is: at one extreme you have pure democracy and freedom, but there are many autocratic regimes in the world. These people have been a curse to their own country, because by following Islamic fundamentalism for the last 47 years, and through sanctions, they have foregone a trillion dollars of oil revenues. Iran is a country that has more oil reserves than Saudi Arabia. It is a country that has scientists, engineers, doctors and you name it. It is a country that, if it followed its own national interest — even under an autocrat, I’m not speaking necessarily about a democrat — like Sisi in Egypt or any other benevolent strongman or strongwoman, whose view is “my national interest is not to antagonise the world”, and which stops saying after 47 years, “Death to America, death to Israel,” and instead says, “My national interest is to engage with the world, open up to the world and eliminate the sanctions,” then it could still be nationalistic and defend its interests.But this anti-Western policy has been a curse and has benefited only a small clique of fanatic Islamists and Revolutionary Guards, who economically and financially have fed off it. It has been a curse to 90 million Iranians. And they’re exporting revolution and proxy imperialism around the Middle East. Look at the Middle East: Lebanon is a failed state. Libya is a failed state. Syria is a failed state. Iraq is a failed state. Yemen is a failed state. Sudan, Somalia, Afghanistan. Most of them are in this condition because the Iranians and their proxies have tried to expand Shia extremism throughout the Middle East. There is no other region in the world with a dozen failed states, and that is a threat to everybody.This is not just an Iran issue. Some of these are major countries. Some are even major producers of energy. Countries like Libya, Iran and Iraq have tons of energy, and because they’re run by fundamentalists they haven’t even been able to do what is good for their own sake.So it should be in the global interest to make sure that this particular regime is neutralised. And I don’t care whether what follows is democratic or some form of benevolent autocrat. There are plenty of benevolent autocrats in Asia and in the Middle East who care about the national interests of their own countries and have civilised relations with the rest of the world. This regime has to either collapse or surrender, because the alternative is a nightmare for the world in the long run.Markets rallied, yes, once there was a ceasefire. Stock markets went up 7% or 8% across Asia, oil fell below 100, bond yields rallied and so on. But it didn’t last, because we knew — or at least I knew — that the negotiations were not going to lead to a deal, and that Iran at this point knows it has leverage, and these fanatics are going to use all that leverage for the long run. That should not be acceptable to anybody.So even if we didn’t like what the US and Israel have done, it should still be in everybody’s interest to finish the job and lead them to de facto surrender. And then, if an autocrat is in power, so be it. It is certainly much better than the current situation for the Iranians, for the Middle East and for the world.00:22:47 – David InglesI think there’s no way to segue to inflation now, but I’ll do it anyway. Assuming we do get that off-ramp, assuming the objectives are met, we still have to deal with what is increasingly now looking like a very long tail of economic fallout on the back of this. What is your assessment of how and when this shows up in the US economy in the coming months? And what does the Fed do about that?00:23:23 – Nouriel RoubiniWell, I would say the impact both on growth and inflation is least for the United States and for net energy exporters. I was just in Brazil a week ago, for example. It’s bigger for regions like Europe, where we are net energy importers, so the terms-of-trade impact is significantly negative. So the impact on higher inflation and lower growth in Europe and the eurozone is going to be bigger. And the biggest impact in terms of both inflation and growth is going to be on Asia.But even in the United States, I would say there’ll be some slowdown of growth and some pick-up in inflation. Now, how much of a slowdown in growth and how much inflation depends on whether you either fully de-escalate and accept this ceasefire. And with the ceasefire, oil prices will never go back to what they were before the war because there’ll be a risk premium, because Iran effectively has a chokehold on the Gulf. So oil will be more like in the 80s.00:24:29 – David InglesWhat’s the floor, do you think, on oil? Where do you think we will see the average floor for oil?00:24:35 – Nouriel RoubiniIf you have de-escalation without a deal and they are in control of the Strait of Hormuz, and given the damage and everything else, I think oil can go towards 80, 80-plus. It’s not going to go back to 60.So there is some impact on global inflation and some impact on global growth. You don’t get a global recession. You don’t get a sustained increase in inflation because it becomes more of a price-level effect with a temporary increase in inflation for a while. So yes, there is economic damage, and in the medium to long term there is a negative impact on the world. But we avoid recession and a significant de-anchoring of inflation expectations, even if the impact, as I said, is strongest in Asia, middling in Europe and least in the United States.The US actually, even before this war, after the April 2 tariff shock, I said we were not going to have a US and global recession, even if everybody on the sell side said so, because I knew the market would force Trump to chicken out. Tariffs went from 3 to 30%, but today they are more like 14 because, two weeks after April 2, the S&P was down 15%, the Nasdaq 20, bond yields were up 80 basis points, high-yield spreads were up 150, and the dollar started to free-fall. That was when Scott Bessent went to Mar-a-Lago to tell the president: “I told you, if you do this, the market is going to punish you, you are going to have a recession, you are going to lose the midterms, and my guy is dead on arrival. Mr President, do you want to double down or do you want to blink and chicken out?” And the president, who is impulsive and not totally rational, decided to blink.And now you have an average tariff of around 14% rather than three. Is that good? Of course not. But does it lead to a global recession? Of course not. That’s why I said we were not going to have a US and global recession. The impact would be some slowdown in growth and some increase in inflation, but moderate.And this year, before the war, there were actually more tailwinds than headwinds to US and global growth because in the US you had monetary easing, there was still fiscal stimulus in the pipeline, the Fed had been cutting rates, financial conditions had eased because the stock market went higher last year, bond yields fell, credit spreads narrowed, and the weakening of the dollar benefited net exports. Consumer and business confidence were strong. And you had this massive secular tailwind from the AI boom. In my view, it is not a bubble. It is really a long-term secular boom that is going to lead to much higher potential growth. US potential growth can go from 2 to 4% by the end of this decade.So those stronger fundamentals were there, and therefore the war becomes a bit of a hiccup as long as it doesn’t last too long. But if it were to worsen severely for many more months, then of course the economic damage for a while could be more significant even for the United States. But my baseline is not a US or global recession, nor a very massive surge in inflation. The US, among advanced economies, is in a fundamentally better condition because of the strength of the AI and technology boom, higher productivity growth, and all the other things coming out of it.00:28:01 – David InglesThe US president’s trip to Beijing got postponed several weeks because of events in the war in the Middle East. There is one scheduled to come up in mid-May, when Donald Trump is due to meet President Xi Jinping. Can we look at that date on the calendar as almost a deadline for Trump to finish the job? Is that incentive enough to make sure things are orderly ahead of arguably a more crucial conversation between those two?00:28:41 – Nouriel RoubiniNo, I don’t think this conflict is going to be over by mid-May, when they’re said to meet up. Certainly this half-baked escalation with the blockade could last for many months. And then the Iranians are going to respond by lots of other things — hurting Gulf producers and so on. Maybe they start attacking Israel again and then maybe the ceasefire completely collapses.So I think the idea that you just have a blockade and the ceasefire remains is highly unlikely. Military escalation is becoming more likely. And if you fully escalate the way I would have done it, it would still have taken maybe two or three months of really heavy escalation until the regime surrenders. There is no way you achieve your goals by mid-May.So either you postpone the meeting with Xi Jinping again, or you go there — but then it’s not going to be a very productive meeting, because before the war Trump knew that the Chinese had leverage through critical minerals, and therefore he decided to re-engage them and try to strike some strategic understanding that reduces tensions for the time being.Now all of this is off the rails, and the Chinese might actually think of the US having created this war as a way of strangling them. And if you look at the blockade, pretty much all of the Iranian oil goes to China, while most of the Gulf’s oil and energy also goes through to Asia. During the war, the US was not preventing Iranian ships from getting out of Hormuz and bringing their oil to China. Now, with the blockade, you don’t allow that anymore. So you are creating further economic damage to China. It angers the Chinese, and they are going to say: what the hell?So it’s not a very constructive way to go to Beijing and try to engage if you are doing that. You might as well postpone the summit further rather than make it a failure.On one side, the Chinese are happy because, as that Economist cover line says, never interrupt your enemy while he is making a strategic mistake. That is one of the ironies for the Chinese: the US has made its own self-goal. Let them rot. They have lost credibility, they have lost deterrence, and their weapons are going to the Middle East rather than being deployed in Asia.But on the other side, Trump is a wildcard, and that is also something the Chinese are not entirely comfortable with. So they must have mixed feelings about him. Some people in Beijing think that actually a weakened Trump is bad for them, because Trump was more willing than some of the hawks to try to re-engage China. If Trump becomes too weak, they worry that the Marco Rubios of the world, or others who are hawkish — even J.D. Vance on China — may get the upper hand. So a very weak Trump is not necessarily in China’s interest either. It’s a mixed bag for the Chinese.00:32:38 – David InglesLet me rephrase that: is Donald Trump the best thing to happen to China recently?00:32:51 – Nouriel RoubiniI don’t know. Some people in China probably have that view. They say your strategic competitor is shooting itself in the foot, is alienating allies all over the world, is starting trade wars, looks like a hot-war warrior, and is destroying both the soft power and some of the hard power of the United States. So let them do it, and we’ll engage the world with trade agreements by showing that we are actually a responsible stakeholder. We don’t start wars, we’re not imperialists, and so on. That’s the argument for why it may be good for them.But this is also a Trump who, compared with even the Biden administration, which cared about human rights and other issues in Asia and China, is ignoring a lot of that. Yes, he imposed tariffs, but then he chickened out. And now, being a dealmaker, he wants to do a deal with China. Within the US, though, there are many in Congress and among his advisers who are much more hawkish, who believe you have to credibly deter China, take a much more muscular approach, impose more restrictions on technology and other things, provide more support to your friends and allies, and take a more containment-oriented approach to China. Therefore, if Trump is weak, as I said, the hawks may raise their heads.But the US has also shown that, even without fully winning this war, from a military point of view it is still a very powerful country with very powerful weapons. China’s theory had been that by using missiles it could destroy US navy assets and aircraft carriers if they got too close. What the US has shown is that, by keeping aircraft carriers in the Indian Ocean and using very precise weapons, it can still do substantial damage. In Desert Storm against Iraq, 90% of the missiles were not precision-guided and would either kill civilians or miss their targets. In this case, a very high percentage of Israeli and US strikes have been much more precise because of drone technology, satellite intelligence, ballistic missiles, guidance systems and so on.And the Iranians have not been able to hit key US naval assets. So if there were a confrontation in Asia, the US could keep those carriers far away from China and still launch a lot of weapons that could damage China or help defend Taiwan. One of the lessons from Ukraine-Russia was that defence tech is now the way wars are fought. We learned from the Ukrainians, from the Russians, from Israel, and now from the United States. The United States is more advanced than anybody else, and I don’t think the Chinese are as far ahead in defence tech as the US. So they have to rethink what a confrontation over Taiwan would look like. The US has shown that it can do a lot while protecting its own assets, and that is another dimension to this.00:37:08 – David InglesWell, a lot of the accuracy these military weapons have gained since Desert Storm was because of semiconductors — and here’s the segue. To see the advancements in chip technology literally in those missiles …That’s a final question, and we’re at the end. But just your thoughts on something that has managed to happen silently, steadily and consistently while this war of the last seven weeks has been taking place: AI has continued to drive markets. An example of that today, as I speak — I haven’t checked my phone in about 30 minutes — but the Taiwan markets are at all-time highs. What are your thoughts, and how is this AI story in Asia-Pacific resonating where you are based in the US?00:38:00 – Nouriel RoubiniYou know, I used to be called Dr Doom because of the financial crisis. And some people now say I’ve become Dr Boom, because I do believe that this is not just about AI. There are about 15 different technologies: AI, semiconductors, robotic automation, humanoid robots, defence tech, quantum, fusion, green tech, fintech, agtech, new materials science, commercial space exploration and commercialisation — you name it. This is a Cambrian explosion of future technologies like we have not seen in human history.And the two big innovators are, on one side, the US and then China. Then there are pockets of innovation in Asia, like Japan, South Korea, Taiwan, India and Israel, and some things in Europe. But my view is that US potential growth is already above 2%, closer to 3% by the end of the decade, regardless of this war, regardless of who is in power in Washington. It doesn’t matter. The dynamism of the US private sector is such that potential growth in the US is going to be 4%, and then after that by 2040 maybe 6%, and then by 2050 maybe 10%.And the other big beneficiary of this innovation is going to be China. It’s not a zero-sum game where we win and they lose, or vice versa, because many of these are general-purpose technologies and you learn from each other. Those who innovate get most of the benefits. Those who adopt the technologies still benefit by adoption, and those who don’t adopt simply don’t survive.So that fundamental story, regardless of geopolitics, climate change or populism, is the driver for the next 10 or 20 years. It is positive for the world at large, and certainly positive for both the US and China. And that remains true. That’s why even at the peak of the war the S&P was down only 4%, and now markets are rallying. The AI story is not a fad, it is not a bubble, it is going to last.And it’s not just AI — it’s these 15 industries of the future. You can debate as much as you want whether the US is ahead or China is ahead, and in which ones. The reality is both of them are doing well in most of them. Some are behind in some areas, some ahead in others. But both of them are going to benefit, and everybody else is going to follow.So that’s the big story: there is a strong positive aggregate supply shock that increases growth and reduces inflation. There is a secular boom driven by technology. And then you have all the shocks that are negative aggregate supply shocks and therefore stagflationary — war, oil shocks, the Middle East, ageing populations, populism, pandemics, climate change, you name it.But since April 2, I’ve said: take Trump’s tariffs. The impact of tech is 200 basis points of increased potential growth, while the impact of tariffs, migration and other things is only 50 basis points. So the ratio is four to one. I’ve also said tech trumps Trump’s temper tantrums, because there is a wide range of things that matter more. Market discipline and technological innovation make sure those other shocks are second order.During a speech I made a joke. I said it doesn’t matter who the President of the United States is — you could have Mickey Mouse as president, and the dynamism of the US private sector is such that the US is going to do great. Even if Mickey Mouse was president, let alone Donald Trump. It was a joke, but people made headlines out of it. Still, I think it’s true. And the same thing applies to China. The US and China are both going to do well.So we are on the verge of a secular boom with massive positive aggregate supply shocks over the long term. In the short run, you also have these stagflationary shocks, which are the opposite: negative aggregate supply shocks that reduce growth and cause inflation. So it’s a tug-of-war between the two. I think eventually technology dominates over the medium term. We can still cause a lot of damage in the short run by doing lots of stupid things.We started with a bit of Dr Doom. I think we got a version of Dr Boom at the end there.

Nouriel Roubini in conversation: Insights on Iran war, oil shockwaves, AI boom and more

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