Author warns of economic blindness to Iran war fallout, comparing it to Covid
In an essay published by Vox, an author who previously wrote about pandemic preparedness argues that markets and the public are underestimating the economic disruption caused by the war with Iran and the ongoing closure of the Strait of Hormuz. The author draws a direct comparison to the early weeks of the Covid pandemic, when the financial markets hit an all-time high shortly before a historic crash. The article cites the International Energy Agency calling the disruption the largest in global oil market history, with global supply down by more than 10 million barrels a day in March. It notes that the 1973 oil embargo removed 7 percent of global supply, while the Hormuz closure has cut supply by 13 percent. The author states that downstream effects are visible, including a corn farmer in Mississippi facing a 60 percent increase in fertilizer costs, fuel rationing in South Korea, Thailand, and Vietnam, and Lufthansa canceling 20,000 summer flights. The S&P 500 hit a new all-time high during the same week as a New York Times front-page report on the crisis, a disconnect the author attributes to cognitive biases. The author makes a falsifiable prediction: if the Strait of Hormuz remains materially restricted through June, the S&P 500 will be at least 10 percent off its April 22 high by Labor Day. The article cites forecasts from Princeton Policy Advisors projecting a US recession beginning in May, and the IMF cutting its global growth baseline to 3.1 percent with an adverse scenario at 2.5 percent.
What’s reported
The author writes that the war with Iran and the closure of the Strait of Hormuz is the crisis not being priced in.
The International Energy Agency calls it the largest disruption in the history of global oil markets, with global supply down by more than 10 million barrels a day in March.
The Atlantic Council notes the 1973 oil embargo pulled 7 percent of global supply off the market; Hormuz has cut that same supply by 13 percent.
Infrastructure damage from the war and shutdown will take months or years to repair.
In Como, Mississippi, a corn farmer told NPR he is buying diesel “hand to mouth”; fertilizer is up 60 percent.
In Dhaka, vehicles line up for propane refills.
The Philippines declared a state of national energy emergency.
South Korea, Thailand, and Vietnam are rationing fuel.
Lufthansa canceled 20,000 summer flights.
The S&P 500 hit a new all-time high the same week the New York Times put the crisis on its front page.
The author argues humans are systematically bad at recognizing when a slow-moving threat becomes a clear and present one, citing Wharton economists’ “ostrich paradox” and six biases: myopia, amnesia, optimism, inertia, simplification, herding.
A 2025 paper in Science by UCLA’s Rachit Dubey showed that when information arrives in continuous form, people fail to perceive a shift even when it is real.
The author makes a falsifiable prediction: if the Strait of Hormuz remains materially restricted through June, the S&P 500 will be at least 10 percent off its April 22 high by Labor Day.
Princeton Policy Advisors has forecast a US recession beginning in May.
The IMF cut its baseline global growth projection from 3.3 percent in January to 3.1 percent, with an adverse scenario at 2.5 percent.
Mark Dowding, chief investment officer at RBC BlueBay, told Bloomberg the current market reminds him of February 2020.
Open questions
The article does not specify the exact date of the war’s start or the precise timeline of the Strait of Hormuz closure. It does not confirm whether the author’s prediction will come true.
Key figures
Robert Meyer (Wharton economist, co-identified the ostrich paradox)
Howard Kunreuther (Wharton economist, co-identified the ostrich paradox)
Daniel Gilbert (Harvard psychologist, quoted on gradual threats)
Rachit Dubey (UCLA researcher, author of 2025 Science paper)
Mark Dowding (Chief investment officer at RBC BlueBay)
President Donald Trump (quoted saying Covid was “going to go away”)
David Dayen (American Prospect, quoted analyst)
Princeton Policy Advisors (forecasted US recession)
International Energy Agency (cited)
Atlantic Council (cited)
NPR (source for farmer quote)
New York Times (front-page report)
Bloomberg (source for Dowding quote)
IMF (cited projections)
Sources: vox.com
