'The Big Short' Investor Steve Eisman Says Iran Crisis Could Be 'Extremely Positive' For Markets, Calls Regime A 'Death Cult' Close To Nuclear Weapons

Investor Steve Eisman has a surprising take on the escalating tensions in the Middle East, one that cuts from conventional wisdom during periods of geopolitical conflicts.

What Happened: On Wednesday, Eisman said the crisis in Iran may actually turn out to be “extremely positive” for global markets and geopolitical stability during his appearance on CNBC’s “Squawk Box.”

The investor, best known for shorting collateralized debt obligations in the lead up to the 2008 financial crisis, which inspired the character played by Steve Carell in the 2015 movie “The Big Short,” describes Iran as a “death cult,” which is now “very close to getting a nuclear weapon.”

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Eisman argues that if Iran succeeds in its nuclear quest, it will trigger a regional arms race, with neighbors like Turkey and Saudi Arabia seeking their own deterrents. “That would have been a disaster,” he says, adding that getting rid of such a death cult anywhere in the world, “is a very positive thing.”

He also states that the markets hadn’t priced in this risk, but he believes the situation now offers potential upside, referring to the removal of a long-term geopolitical destabilizer that could benefit both the markets and global security.

Why It Matters: Stocks have been relatively unfazed since the beginning of this conflict, with limited impact on the benchmarks thus far.

Economists, too, have recently stated that the impact on the U.S. economy from this conflict is fairly limited. David Seif, Chief Economist for developed markets at Nomura, said, “recession risks are higher, but only by a tiny bit.”

The Chief Economist at Santander U.S. Capital Markets, Stephen Stanley, shared similar sentiments, that “the fallout to the U.S. is pretty limited.”

There are, however, several beneficiaries of this conflict, which primarily include defense companies that have been rallying over the past week.

Higher energy prices, however, can weigh on the economy, with Warren Patterson, head of commodity strategy at ING, saying that “Iran is a meaningful oil producer, pumping 3.3 million barrels per day and exporting around 1.7 million,” and any disruption in this, he says, can push prices to $120 per barrel.

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