Mohamed El-Erian Warns Of 'Difficult' US Economic Outlook Amid Israel War: 'If This Expands And Brings More Parties...'

What Happened: Influential economist, Mohamed El-Erian, expressed concerns over the intensifying conflict in Israel and its potential impact on the U.S. economy. El-Erian shared a CNBC Squawk Box post via X, formerly Twitter, in which he cautioned that the situation could exacerbate the already challenging economic conditions and lead to a weaker global economy and increased inflationary pressure.

El-Erian issued this warning on Monday, noting the potential challenges the markets could face under these circumstances.

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Why It Matters: El-Erian’s comments come against a backdrop of rising interest rates, a robust dollar, and escalating oil prices. These factors, combined with the ongoing conflict in Israel, could put the U.S. economy on a precarious path. Just last week, he had pointed out the risk of stagflation, a condition characterized by low or zero growth and persistent inflation.

The economist had previously noted that the outlook on the U.S. economy has been revised six times in the last 15 months. Despite the Federal Reserve’s decision to not raise rates in the September meeting, economic uncertainties persist. The potential expansion of the conflict in Israel only adds to these concerns.

El-Erian’s warnings also align with the views of top corporate leaders, who, according to a recent survey, foresee a high chance of recession in 2024, in stark contrast to Federal Reserve officials who insist on a negligible probability.

Photo by International Monetary Fund on Flickr

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