Morgan Stanley Warns Iran War Creates ‘Everybody Loses’ Scenario for Global Economy.

Morgan Stanley has warned that the growing conflict involving Iran could hurt the global economy, creating what it calls an “everybody loses” situation. Rising oil prices caused by the conflict are likely to push inflation higher, weaken economic growth and cause instability in financial markets around the world.

The bank says the surge in energy prices is disrupting a traditional investment strategy known as the 60/40 portfolio, where investors hold 60% stocks and 40% bonds. Normally, bonds rise when stocks fall, helping balance losses. But during periods of high inflation, both stocks and bonds can fall at the same time, leaving investors with fewer safe options.

A major concern is the threat to oil supplies passing through the Strait of Hormuz. This route carries about 20% of the world’s oil and liquefied natural gas. If tensions disrupt this route, oil prices could rise sharply. Morgan Stanley estimates that a 10% increase in oil prices could raise U.S. inflation by about 0.35 percentage points within three months.

The International Monetary Fund has also warned that the conflict could slow global economic growth. Higher energy costs, trade disruptions and financial market volatility could damage economies if the war continues.

Economists say central banks may face a difficult choice. If they focus on controlling inflation by tightening policies, economies could fall into recession. But if they try to support growth by keeping policies loose, inflation could rise further. Either way, Morgan Stanley believes the conflict could lead to higher living costs, weaker spending and more unstable markets worldwide.