Nouriel Roubini

The AI boom is part of a Cambrian explosion of about 15 general-purpose technologies—including semiconductors, robotics, defense tech, quantum fusion, green tech, and space commercialization—that will drive a secular increase in productivity and potential growth. This is a long-term positive aggregate supply shock that will raise U.S. potential growth from 2% toward 4% by the end of the decade and also significantly benefit China. The technological positive shock outweighs stagflationary geopolitical shocks, and the trend is not a bubble but a durable secular boom.

China is one of the two primary global innovators in the set of transformative new technologies alongside the U.S., and it will significantly benefit from the adoption and development of these technologies. This technological advancement will drive China's growth, making it a major beneficiary of the secular boom.

The AI boom is part of a Cambrian explosion of about 15 general-purpose technologies—including semiconductors, robotics, defense tech, quantum fusion, green tech, and space commercialization—that will drive a secular increase in productivity and potential growth. This is a long-term positive aggregate supply shock that will raise U.S. potential growth from 2% toward 4% by the end of the decade and also significantly benefit China. The technological positive shock outweighs stagflationary geopolitical shocks, and the trend is not a bubble but a durable secular boom.

The U.S. economy is in a strong fundamental position due to the AI/technology boom, monetary easing, remaining fiscal stimulus, strong private-sector dynamism, and easing financial conditions. Potential growth is set to rise significantly regardless of political leadership, and the U.S. is better positioned than other advanced economies to weather stagflationary shocks. This supports U.S. equity markets.

The blockade and resulting higher oil prices will lead to falling stock markets due to reduced consumer and business confidence, growth slowdown, and higher inflation.

Higher inflation and economic uncertainty from the blockade will lead to higher bond yields, implying falling bond prices.

The US naval blockade in the Strait of Hormuz is a game of chicken that Iran can outlast, leading to sustained higher oil prices because Iran controls the strait and can withstand economic pressure, disrupting supply.