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As the Iran conflict escalates, Nobel Prize-winning economist Paul Krugman warns that the conflict could cause a severe global economic shock.
“It’s potentially really scary,” Krugman said during an interview with MS NOW’s Chris Hayes. When asked about the economic recovery from the oil supply shock caused by the conflict.
Crude oil prices have already risen by about 56% in the past month (2). But Krugman suggested that the current price may be underestimating the potential outcome, arguing that traders assumed the war would last only a week or two.
“If this continues, it’s — 20% of the world’s oil goes through the Strait of Hormuz, and there’s really no other way to get it there,” he said. “It’s huge. It’s a bigger shock to the world’s oil supply than the oil shocks of the 1970s.
“It’s just a huge bottleneck for the world’s energy supply, and the price could easily be higher than where it is now if it continues.”
Krugman isn’t the only one sounding the alarm. Qatar’s Energy Minister Saad al-Kaabi recently said that if the war disrupts energy exports from the Persian Gulf, it will harm the world economy. He predicted that oil prices would rise to around $150 per barrel in two to three weeks if shipping through the Strait of Hormuz is not possible.
Customers are already feeling the impact. In the United States, the average price of regular gasoline rose about 23% last month to $3.63 per gallon (4).
Krugman noted that while presidents are often blamed for rising oil and gasoline prices, “they normally have no influence on it.” But this time he said that the situation is different.
“But start a war that threatens to cut off the world’s oil supply – it will,” he said.
If energy markets remain volatile, the ripple effects could extend far beyond gas prices. The oil shocks of the 1970s ushered in a period of simultaneous recession and inflation in the United States—a painful combination known as stagflation.
That said, history shows that savvy investors have often found ways to protect their wealth from the ravages of inflation—even during geopolitical turmoil and war.
Read more: I’m almost 50 and have no retirement savings. Is it too late to catch up?
Read more: Non-millionaires can now invest in this $1B private real estate fund starting at just $10
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 currency, the yellow metal cannot be printed at will by central banks.
Gold is also considered the ultimate safe haven. It is not tied to any one country, currency or economy, and in times of economic turmoil or geopolitical uncertainty, investors often flock to it – driving up prices.
Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, has repeatedly highlighted gold’s role in building a flexible portfolio.
“People typically don’t have enough gold in their portfolios,” Dalio told CNBC last year. “When times are bad, gold is a very effective diversifier.”
Recently, he posted on X, “As for investing, sell off all debt and buy gold because wars are financed by borrowing and printing money.”
Over the past 12 months, the price of gold has increased by more than 65% (8).
One way to invest in gold that also provides significant tax benefits is to open a gold IRA with Preferred Gold.
Gold IRAs allow investors to hold physical gold or gold-related assets in a retirement account, thus combining the tax benefits of an IRA with the protective benefits of investing in gold, making it an option for those looking to help protect their retirement funds against economic uncertainty.
When you make a qualifying purchase with Priority Gold, you can get up to $10,000 worth of precious metals for free.
Investment legend Warren Buffett also weighed in on what the wars mean for your money.
“The one thing you can be pretty sure of is that if we go to a major war, the value of the currency will 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 want to do is hold onto money during a fight.”
Buffett then offered guidance on which assets are best held during conflict.
“You might own a farm, you might own an apartment house, you might want to own securities,” he said.
Real assets such as rental properties are held when the value of money is lost. When inflation rises, property values also rise, reflecting higher costs of materials, labor and land. At the same time, rental income rises, providing landlords with an income stream that keeps pace with inflation.
In fact, Buffett has repeatedly cited real estate as a prime example of a productive, income-producing asset (10). In 2022, he said that if you offered him “1% of all the apartment buildings in the country” for $25 billion, he would “write you a check.”
why? Because no matter what happens in the world, people still need a place to live and apartments can generate constant rental income.
Of course, you don’t need $25 billion—or even to buy a single property—to invest in real estate. Crowdfunding platforms like Arrival offer an easy way to get into this income-producing asset class.
Backed by world-class investors like Jeff Bezos, Ariad allows you to invest in rental housing shares with as little as $100 – all without the hassle of mowing lawns, fixing plumbing or managing difficult tenants.
The process is simple: search a curated selection of homes that have been evaluated for their appreciation and income potential. Once you find a property you like, select the number of shares you want to buy and then sit back when you start receiving positive rental income distributions from your investment.
For a limited time, when you open an account and add $1,000 or more, Arrivals will credit your account with a 1% match
Another option is Lightstone DIRECT, which offers qualified investors access to prime 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 private equity investment firms in the United States, 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 investments since 2004.
With Lightstone DIRECT, you get access to the same multi-family and industrial transactions that Lightstone pursues with its capital.
Here’s the kicker: Lightstone invests at least 20% of its capital in each deal — about four times the industry average. With skin in the game, the company ensures that its profits are directly aligned with 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 may not be the best move for you. And when the economic outlook is uncertain, these differences are even more important.
If you’re not sure where to start, now might be a good time to contact a financial advisor through Advisor.com.
Advisor.com is an online platform that matches you with vetted financial advisors who fit your specific needs. They can help you develop a strategy for your unique financial situation, whether you’re looking to protect your wealth, generate income or plan for long-term financial security.
Once you’re matched with a consultant, you can book a free consultation with no obligation to hire.
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HuffPost/YouTube (1); Business Economics (2, 8); By money (3, 6); American Automobile Association (4); History of Energy (5); x (7); CNBC/YouTube (9); CNBC (10).
This article provides information only and should not be used as advice. It is provided without warranty of any kind.
