President of the “world’s largest asset manager”: Investors underestimate the risks, even if the Iran war ends soon

# Zhao Ying

Source: Wall Street News

BlackRock President Rob Kapito issues a rare warning: markets are **seriously underpricing the Iran war** — gold down 15%, U.S. stocks down less than 5%, traditional safe-haven logic has completely broken down. He cautions that **even if the war ends tomorrow, oil could still surge to $150 a barrel**, potentially dragging U.S. economic growth down by two percentage points. Apollo President Jim Zelter sounds a simultaneous alarm: U.S. consumer confidence is cracking, and recession risk is closing in.

BlackRock’s president has warned that markets may be **dramatically underpricing the economic shock from the Iran war**.

According to Bloomberg, BlackRock President Rob Kapito said on Thursday that even if the Iran war ends soon, the impact on growth and inflation will persist, and investors’ current optimistic expectations significantly underestimate the risks. He warned that oil prices could still surge to $150 per barrel, as damaged supply chains will take time to return to normal operation.

Jim Zelter, President of Apollo Global Management, issued a warning at the same event, saying a prolonged conflict would sharply raise the risk of a U.S. recession and threaten the credit cycle. He noted that U.S. consumers are already showing clear signs of financial strain, with confidence continuing to decline.

These remarks have amplified concerns about excessive investor optimism. Nearly a month into the war, the S&P 500 has fallen less than 5%, while traditional safe-haven assets such as gold and U.S. Treasuries have diverged sharply from historical patterns.

## Market pricing breaks from historical norms

Kapito told the Australia Asia Financial & Innovation Conference in Melbourne that the market’s reaction to the Iran war risk is strikingly different from past experience.

He pointed out that in previous similar conflicts, investors typically bought short-term U.S. Treasuries, purchased gold, and shorted equities. This time, however, none of these traditional defensive trades have worked as expected — gold has dropped nearly 15%, Treasury prices have fallen on inflation fears fueled by higher oil, and the S&P 500 is down less than 5%.

Kapito said his biggest concern is that investors are not seriously examining the potential impact of the conflict, but simply assuming an optimistic outcome.

“Will this conflict last a week, six months, or a year — what does that mean for the companies I own?” he said.

## Economic shock unlikely to fade quickly, even if war ends

Kapito warned that **even if the war ends tomorrow, oil could still spike to $150 a barrel**, because disrupted supply chains require time to resume full operation.

He further estimated that the conflict could reduce economic growth by as much as two percentage points, while pushing inflation up by a similar magnitude. This assessment implies that current market pricing of the war’s impact falls far short of reflecting the deep global economic damage from sustained supply chain disruptions.

Bloomberg previously reported that JPMorgan strategists also noted investors have shown **excessive complacency** toward the Iran war.

Despite warning of near-term risks, Kapito remains optimistic about the long-term outlook. He cited the development of artificial intelligence and the rise of private markets as major long-term tailwinds for investors, saying these structural trends will provide ongoing support for markets.

## U.S. consumer confidence under pressure, recession risk rising

Apollo’s Jim Zelter focused on the U.S. consumer side. He said the American consumer, who has supported the U.S. economy for years, is now showing clear financial stress — consumer confidence weakened consistently in the first two months of the year, and further oil price gains will erode real purchasing power even more.

“This is not really an interest rate shock; it’s a confidence shock in consumer spending in the world’s largest economy,” Zelter said. He warned that if the conflict continues, the risk of a U.S. recession will rise sharply, and the credit cycle will face greater pressure.

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