Ken, thanks so much for joining us on the Semafor stage again. We're grateful Ken is a partner, but this is going to be an editorial session and a lot to get to given our state of the world. So Ken, I wanted to just start off with where we are in the global economy just given all the volatility we've seen since the attacks in Iran, a lot of nervousness around the world, I'm sure among people in this room as well. How are you seeing this play out especially for Citadel which is such a major player in the commodities markets?
So the war in Iran is obviously one of the greatest geopolitical events of our lifetime and the president has made the decision to pursue the objective of a nuclear-free Iran which I think is an incredibly worthy objective. I applaud the president for trying to create a lasting peace in the Middle East because clearly if Iran was able to build a nuclear weapon, we would see nuclear weapons across the entire region and I think that could have dire consequences for the safety and well-being of the world. Having said that, we are now in the midst of an energy crisis. Everyone in this room knows that with the straits being closed that the world's supply of oil has been severely curtailed and for that matter the world's supply of natural gas has been curtailed and so we have a classic energy price shock unfolding across the world as we speak that of course will create demand destruction. It will cause economies across the world to decelerate. The risk of a recession has increased and central banks are making some really difficult decisions. Is the inflationary spike that this will create, will they view those as transitory and leave monetary policy as is or will they view themselves as having to raise rates to try to keep inflation expectations well anchored. So this really is a very, very treacherous moment for the world economy as we navigate the consequences of trying to secure a lasting peace in the Middle East.
Well, we heard at least some of us Treasury Secretary Scott Bessent say last night that this Iran situation is the epitome of a transitory situation when it comes to inflationary pressures. But we've seen as particularly in Asian markets, the ramifications of what's happened in that region. Do you see the longer term effects even if let's say the ceasefire and these talks that are unfolding actually lead to some progress?
Well, so the key is the progress will be measured by the reopening of the straits from a geopolitical perspective. Obviously, the agenda of a nuclear-free Iran is one issue, but from a macroeconomic perspective around the world. From that lens, the key criteria is the resumption of the continued flow of energy products from the Middle East without tolls, without harassment. That's the key issue for the world's financial markets. And I think that here in the United States, we are somewhat sheltered from the worst of this because of America's focus on energy independence. I mean, thankfully, the development of fracking, the robust use of a variety of fuel sources in America means that our economy is actually much more sheltered from the consequences of this energy shock than, for example, most of the Asian economies or for that matter Europe. You know, Europe shut down one of their last great natural gas producing fields just a few years ago before the war or as the war with Russia and Ukraine unfolded. So Europe is now beholden more than ever to the United States, to the Middle East for energy. Countries like Germany, like Italy are going to face the brunt of this crisis in a much more profound way than the American people are.
So what is at stake for the global economy if safe passage through the strait is not guaranteed and if it remains shut down for all intents and purposes?
I mean let's assume it's shut down for the next 6 to 12 months. The world's going to end up in a recession. There's no way to avoid that. We'll see a rapid shift towards alternative fuel sources. We'll see wind. We'll see nuclear. We'll see solar, we'll see huge pushes to reduce dependencies on fossil fuels, but that's measured in years, not months. So, we are going to see an acceleration of some of the historical trends that have played out over the last 10 years as the world rapidly tries to move away from fossil fuels if we lose that very dependable source of fuel being the Middle East.
Yeah. And how has it been for you running Citadel in this very volatile period where the situation is just changing so rapidly. Have you just had some bare knuckle moments the last few months?
You know, I've got an extraordinary team and having said this, this has been an extraordinary period of time. So you really have seen markets go through quite a bit of chaos and it's been unnerving on many days for all my colleagues and for myself. But this is what we're paid to do. We're paid to try to navigate scenarios like this. We're paid to assimilate and process information. We're paid to make the best possible decision that we can make. I think what has caught most of the world's financial players flatfooted has been the grit and the perseverance of the Iranian people. The Iranian military is still very much intact. The population is still very much under the control of the current regime. And the fact that Iran has continued to be able to demonstrate its resiliency under a massive attack by the US is really quite remarkable. And to be clear, the US military has achieved virtually every single achievable objective that you can from the air. I mean, this is by no means a criticism of the US military. The US military has absolutely delivered. We have effectively destroyed every single target that you can strike from the sky. It's much more a statement about the resiliency, perseverance, and grit of the Iranian military and the Iranian people.
Yeah. And all the drones and everything that they're launching against the region, the missiles they still have in reserve, the mobile launchers, and the fact that they had put in place a very well thought through plan and how to distribute decision-making under attack. So I think what is of note is that if we had waited several years to do what we're doing today, the consequences I think would actually be far more dire.
So, for example, there's a reasoned belief that the Iranian strike on the Qatari LNG fields was done by a missile that is able to change trajectory on impact. Missiles of that nature can evade the Iron Dome. Now, Iran can only produce a very small number of these missiles today, but if they were able to produce a significant quantity of these missiles, all of Israel would be subject to attacks of unimaginable consequences. And that would only be a few years down the road. Imagine Tel Aviv being struck multiple times by high impact, high radius of destruction weapons. It would be of profound consequences to the Western world.
Yeah. So despite what we're seeing today, if it had happened later, it could actually be much worse.
It could have been far worse. And that's one of the problems you have in leadership as the president of the United States is that the counterfactual will never be known. Right? He had made a very difficult decision about what to do right here, right now. The history has been forever changed. No one would ever know what the counterfactual would have been if he had not moved now or for that matter had struck their nuclear weapons production facilities last year. You know, it's well established within the defense space that the Iranians were going ever deeper in where they were located both the weapons production systems and the centrifuges. We were quickly moving beyond the ability for the United States to actually strike them with any efficacy whatsoever. Like literally months away from the point where the Iranians would be able to continue the pursuit of nuclear weapons with no fear of attack by the United States.
So timing really mattered.
Yeah. So I wanted to talk about your time here last year. I think for a lot of people who came to our event last year who watched online heard you talk about the American brand, you know, having been hurt, the idea of America being hurt in terms of its image around the world when you're talking about presidential leadership and some of the decisions that have been made in the last few months. Where do you see the American brand today? Has it been further tarnished because our allies are questioning our resolve, our dependency, or do you see it's in a sort of a status quo state?
Look, I think it's a brand that there's been both good and bad that has happened to the American brand over the course of the last 12 months. You know, for example, on the good side, look at what happened in Venezuela. Venezuela was unquestionably like a planet in orbit around China. And we went to bed one night and that planet changed solar systems. It went from the Chinese solar system to the US solar system overnight with no loss of American lives and very little loss of Venezuelan lives. It was one of the most remarkable regime changes in the history of the world and the Trump administration pulled that off with incredible grace. Now having said that, I think that probably created undue confidence that we could effectuate the same change in Iran and I think we did a very poor job of messaging to the world the moral imperative for what has happened in Iran over the course of the last 50 days. We did not position this issue with the world through the right talking points and nor did we bring our allies on board with us and I think that was a mistake. I think this is one that we really should have worked with the Europeans much more aggressively to create a united front for the cause of peace in the Middle East and the cause of peace in the world. I mean, we have long taken for granted that we are in a world where you don't have to worry about the consequences of nuclear war. But when I was growing up in school, we had the drills where you'd go underneath the desk and duck in the event of a potential strike by the Russians on the United States with a nuclear weapon. Those memories are lost to the current generation of young people in America. And I think the president being of the age he is has an appreciation for just how important it is to live in a world where we do not have a massive proliferation of nuclear weapons into the hands of countries that are sworn enemies of our country.
