“Impunity has become the flavour of the year.”
The checks and balances holding nations to account for behaviours have been eroded, leading to ‘frequent’ and ‘violent’ economic shocks, like that in the Strait of Hormuz, says Allianz chief economic advisor Mohamed El-Erian.
Mohamed El-Erian was speaking to Rosie Wright and Calum Macdonald on Times Radio Breakfast. Listen live every day 6-10am.
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We are living in a world that is subject to more frequent and more violent shocks, and those shocks can have an unthinkable element to them. Now there's a good reason for that. We've lost unifying themes. We've lost the rule of law. Impunity has become the flavor of the year, if you like. There's no longer the checks and balances that were holding nations back to certain behavior. And what we're seeing is more frequent and more violent shocks to the global economy.
President Trump says tonight's deadline for Iran to reopen the Strait of Hormuz is final. If the Iranians agree, and it's a big if, global trade will flow much more freely. But the economic wounds will take a very long time to heal. The impact on oil and gas prices will linger. Mohammed El-erian is chief economic adviser at Allianz, the insurance giant. He explains why the war has so many knock-on effects.
Everyone is hurting. They're hurting from higher energy prices. They're hurting from higher interest rates. Some are soon going to hurt from physical lack of physical supplies of energy. In terms of who's hurting the most, you would have to go to Asia because they are the least energy independent. And already we've seen steps to reduce consumption. And over there they're looking not just at higher prices, but they're also looking at significantly lower growth.
Yeah, I mean there's an economic logic that few people realize and it will continue until we get a circuit breaker in the war. Phase one is higher energy prices, higher interest rates. We felt that in the first two weeks of the war. Phase two, the price shock becomes much broader. So it develops into inflation. That is what we are feeling now. Phase three, you get what's called demand destruction. Economic activity declines. Unemployment goes up. So, it's no longer just a price shock, but it's also a growth shock. Some countries are entering phase three now. Not the UK, but some countries are entering phase three. Phase four, which I hope we never get to, is not only to get economic damage, but you get financial instability. And that in itself becomes a drag on economic growth and well-being.
So first you get people who can no longer afford certain things because their disposable income has been eaten up. Paying for petrol means you have less money to pay for things elsewhere. The second element of demand destruction tends to be the governments try to discourage consumption. You've seen some developing countries, for example, close everything after a certain hour to try to lower energy consumption. And then you have higher interest rates in all this. As inflation fears go up, interest rates go up and stay up. And that also means that borrowing costs are higher and companies invest less.
You mentioned that that isn't the UK yet. The UK and the EU are potentially a bit better positioned, but how long do you think they'll be able to sustain that position for?
So, the UK and the Euro zone, the EU are in phase one and phase two. Energy shock, higher interest rates and inflation in the pipe. They can stay there for three to four weeks, but if this war, if the disruptions of the war continue, then they will enter phase three as well. The well-placed, ironically, is the main warring party, the US, because they have energy independence. So they will enter phase three much after the UK and Europe.
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El-Erian, M. (2026, April 7). Iran Crisis: Decline In Checks And Balances Causing ‘Violent’ Economic Shocks | Mohamed El-Erian [Interview transcript]. Times News. CEOInterviews.AI. https://ceointerviews.ai/interview/811783/
MLA
Mohamed El-Erian. "Iran Crisis: Decline In Checks And Balances Causing ‘Violent’ Economic Shocks | Mohamed El-Erian." Times News, 7 Apr. 2026. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/811783/.
BibTeX
@misc{elerian2026_811783,
author = {Mohamed El-Erian},
title = {Iran Crisis: Decline In Checks And Balances Causing ‘Violent’ Economic Shocks | Mohamed El-Erian},
howpublished = {Interview transcript, Times News. CEOInterviews.AI},
year = {2026},
month = {apr},
url = {https://ceointerviews.ai/interview/811783/},
note = {Speaker-attributed transcript with timestamps}
}
