- Ken Griffin said Iran's "grit and perseverance" caught the investing community "flat-footed."
- The founder of Citadel and Citadel Securities spoke at Semafor's World Economic Forum on Tuesday.
- The billionaire expects a recession if the Strait of Hormuz is closed for the foreseeable future.
As Ken Griffin said, hedge funds are paid to deal with market volatility, and for the most part, his firm and several peers managed March's chaotic markets reasonably well.
But what caught the investing community "flat-footed" was the "grit and perseverance of the Iranian people," said Griffin, the CEO of $69 billion Citadel, at Semafor's World Economic Forum on Tuesday.
This was not a critique of the US military, Griffin made clear, but instead an acknowledgment that Iran has withstood the attacks by the US and Israel as well as it could have.
Now the economic pressure from the closure of the Strait of Hormuz, the narrow waterway where a significant proportion of the world's oil and natural gas passes through, will be front and center for countries around the world, particularly in Asia and Europe, Griffin said.
The US is somewhat insulated thanks to its energy production capabilities, but a closure of the Strait for 6 to 12 months will trigger a global recession no matter what, he added. The adoption of alternative fuel sources globally will increase rapidly as well, Griffin said.
"We have a classic energy price shock," he said, while also applauding President Donald Trump's administration for pursuing a nuclear-free Iran. Still, Griffin believes the US should have done more to bring European allies on board with the Iranian strikes to have a "united front."
Now, the world's central banks must decide whether the spike in inflation caused by surging energy prices is enough to raise interest rates. Higher inflation, coupled with fears that artificial intelligence will make scores of jobs obsolete, creates "a very stressful period for the American worker," Griffin said.
He has faith in Kevin Warsh, Trump's nominee to be the next chair of the Federal Reserve, to make "thoughtful" decisions with the American people in mind.
While Trump has "jawboned" the Fed more than other administrations, Warsh will act independently of the White House when pursuing the central bank's dual mandate, Griffin said.
Regardless of the what-if scenarios, market participants and geopolitical forecasters can't change the past and must deal with the current-day reality, he said.
"The history has been forever changed," Griffin said.
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