How the war in Iran changed the global economy forever

**SPEAKER_1** (0:01)
Welcome to On Deadline, your radio news from Odyssey newsrooms across the country. Let's talk about trends, first in the global economy and then in the youth workforce. And then we'll get to the trend where Gen Z doesn't go on dates.
But we'll kick things off with the economy from KMOX in St. Louis.

**John Horn** (0:19)
I'm John Horn, economics professor in the Olin Business School at Washington University in St. Louis. Do you agree that the conflict with Iran has triggered some permanent changes in our global economy?

**SPEAKER_3** (0:30)
The simple answer is yes. The more complicated answer is even if there's an agreement tomorrow that sort of says for the next 20 years, the US and Iran agree to all kinds of conditions and stipulations, I think there's enough uncertainty about what might come about.
Reading today about Iran putting insurance on passage through the strait, and they could shut it down at any point, not just because of something the US does. I think a lot of businesses and a lot of countries are starting to question, we always thought we were going to get oil, but now that might not be the case and we don't know what's going to happen with these shocks. I think there's just a lot more uncertainty. We've talked about tariff uncertainty before. This is just one more thing to pile on top of it.

**John Horn** (1:17)
When you have a lack of confidence in something so key as, for example, the Strait of Hormuz, what are the ripple effects of that?

**SPEAKER_3** (1:25)
I think the challenging thing with it is it's base, it's energy and energy drives everything, whether it's delivery of our packages that we order, it's the energy which runs the factories which produce the things, it's the energy which powers the utilities which create the power for our homes or for our computers or for whatever.
There's so much that we rely on for energy, it's not just like, well, we can't get this computer chip anymore, it's everything. The price of everything gets adjusted and the uncertainty about, should we switch now to different forms of energy development or storage? Most of those are not two or three-year investments. To think about, should we do that? It's like with the tariffs, if this is going to be in place for 15, 20 years, yeah, I'll bring manufacturing back. If this challenge with the Strait of Hormuz is going to happen for the next 15, 20 years, then absolutely let's invest in solar and wind and alternative technologies. But if it's going to be over in 18 months, maybe you just ride it out. I think that's why it's so challenging, is you start to make a shift into some new big investment and then it just goes away, and everyone else is sitting there saying, great, we're back with low energy prices. That makes it hard for you to be the first one to take that step.

**John Horn** (2:47)
Could this reshift who the power brokers are when we talk about energy markets?

**SPEAKER_3** (2:55)
I think we've always seen the Middle East as the power brokers with oil, but we've seen now that the UAE and Saudi Arabia, UAE essentially pulled out of OPEC, and now there seems more tension among Middle East countries, not aligning behind what OPEC should be doing. For the oil production around the world, there could be shifts in who you pay attention to plus more risks, because for better or for worse, you just look to OPEC and that was the decision-making about what was going to happen with oil markets.

**John Horn** (3:28)
Anytime there's a shift in the world, not everybody is at a disadvantage. There are some corporations, some countries that can benefit from situations like this. Have you seen that?

**SPEAKER_3** (3:39)
Well, the big one seems to be China. Like I said before, they're the manufacturing hub of the world, so for producing solar panels, batteries, wind turbines, the equipment which runs all that, to the extent that there's a shift away from oil and gas production to alternative energy sources, China's prime to be the supplier to the world for that equipment. Because of the conflict with the United States in terms of trade, are they going to be able to continue to trade with the US? Where else in the world can they sell everything they keep producing?
And they have some challenges with their own internal economy growing in terms of consumption and sort of compensating for what they can't sell. So China is well positioned in terms of the technology and in terms of the production and the manufacturing, but that doesn't necessarily mean that they're going to go back to like 10% growth that they had a couple of decades ago.