‘From Iran War to Bond Yields’: ‘Dr Doom’ Nouriel Roubini Names 4 Risks Looming Over US Economy | News Today

Economist Nouriel Roubini, known as “Dr. Doom” for his often bearish market calls, remains optimistic about the investment environment overall, but sees several risks looming over the US economy.

In an interview with Bloomberg, Roubini, who rose to prominence after predicting the 2008 financial crisis, pointed to the ongoing Iran war, higher bond yields and the possibility of a market correction among his key concerns.

At the same time, he remains bullish on the rise of artificial intelligence (AI), citing the billions tech companies are spending on AI infrastructure and the potential productivity gains that could follow.

Here are four risks Roubini pointed out:

1. The Strait of Hormuz remains closed

Roubini pointed to continued disruptions to oil flows through the Persian Gulf as a major risk to markets.

The issue has weighed on markets since the start of the Iran war and sent oil prices soaring earlier this year. Although oil prices have fallen from their wartime highs, Roubini warned they could rise again if the conflict continues and oil supplies decline.

Higher oil prices also weighed on risk assets such as stocks, reflecting concerns about their potential impact on inflation and economic growth.

Brent crude, the international benchmark, rose 6% this week as the US and Iran launched fresh strikes. Meanwhile, crude stockpiles in the U.S. Strategic Petroleum Reserve hit a 43-year low last month, according to the latest data from the Energy Information Administration.

Read also | US economy adds 162,000 jobs in August, unemployment holds at 4.1%

2. Iran War Could Escalate After US Midterm Elections

Roubini also sees a risk that the Iran conflict could intensify after this year’s US midterm elections.

He suggested that concerns about President Donald Trump’s presidential legacy could influence the administration’s approach to the conflict and potentially lead to more military pressure on Iran.

“If they lose the House and he starts bombing Iran and tries to win a war — that’s always a risk,” Roubini said.

3. Bond yields could continue to rise

Rising concerns about government deficits and the need for what Roubini called “fiscal consolidation” could boost bond yields, he said.

“If that doesn’t happen, bond yields may go higher, which could put pressure on and crowd out some domestic demand,” Roubini said.

The US bond market faced pressure on concerns that the country’s budget deficit could reach unsustainable levels and that inflation could remain elevated for an extended period.

Higher yields may also reflect investors demanding higher yields from holding government debt, while expectations around interest rates and inflation may influence the direction of bond yields.

Read also | Trump’s war in Iran could last another six months, former US defense secretary warns

4. Markets may face a correction

Despite the positive assessment of the investment environment, Roubini warned that markets may experience a correction.

“There could be some corrections,” he said, adding that he does not believe the current AI rally represents a market bubble.

“Downside risks are the usual suspects, but we are in the midst of a real global investment boom,” Roubini said.

Other forecasters also expressed concern about a possible correction as bond yields remain elevated and markets enter a seasonally weaker period.

According to a Bank of America analysis cited by Business Insider, the S&P 500 saw its weakest three-month average performance between August and October going back to 1928. In years when the index fell, the average correction over that period was 7.35%.

Why Roubini remains optimistic about AI

Despite these risks, Roubini’s outlook is not entirely bearish.

His optimism is largely linked to the AI ​​investment boom. Tech companies are spending billions on AI infrastructure, and the potential productivity gains from these investments could support the broader investment environment.

Roubini therefore sees a market environment where significant risks remain, but where an AI-led investment boom could continue to provide an important source of optimism.