'Dr. Doom' shares biggest economic concerns as the US war on Iran persists

The war on Iran could have serious implications for inflation and interest rates, said a noted economist.
"But there are three types of inflation. One is when you have a temporary increase in the price level and it fades away. The second one is when there is a permanent increase in the price level but inflation expectations are not anchored. And the third one is when there is a rise in the inflation rate and inflation expectation," NYU professor Nouriel Roubini said on Yahoo Finance's Opening Bid (video above).
"In the first two cases, the optimal response is to wait and see and stay on hold, not to cut interest rates, not to increase them. But if inflation expectations become anchored, the Fed is forced, or any central bank is forced, to raise policy rates. Otherwise, you have a permanent increase in inflation expectations. So we don't know yet whether we're going to be in that third scenario. It depends on how long the war lasts and for how long oil prices are going to stay well above $100 per barrel."
Read more: How oil price shocks ripple through your wallet, from gas to groceries
Roubini, famously dubbed "Dr. Doom" for his early prediction of the 2008 housing market bust, is one of the world’s most influential economists. His career spans the highest levels of policy and academia, including roles at the White House Council of Economic Advisers, the Treasury Department, and the International Monetary Fund (IMF).
Added Roubini on the economic outlook, "I would say that if oil stays above $100 until end of April, the impact on inflation is greater and the impact on growth is also somehow greater. But it's not enough [to put the economy into a recession]."
The stock market has held up well despite the oil price surge calling into question the output potential of the US economy this year.
But economic cracks from Operation Epic Fury are beginning to emerge.
The University of Michigan’s preliminary consumer sentiment reading for March fell to 55.5, its lowest level of 2026. Interviews conducted before the strikes on Iran showed rising consumer optimism, but the data collected in the nine days following the military action "completely erased" those gains.
Expectations for personal finances fell 7.5% nationally, a drop that stretched across all income levels and political affiliations.
Meanwhile, flash PMI manufacturing surveys for March indicate a sharp slowdown in activity.
"[Higher gas prices are] absolutely recessionary in the short term," former Trump administration insider Gary Cohn said on another Opening Bid episode.