Expect ‘painful’ economic cycle that 2008 financial crisis, warns expert

Investment veteran Josef Schachter, president of Schachter Energy Research Services, has cautioned that the global economy could be heading toward a prolonged and more painful cycle.

According to Schachter, the downturn is likely to last longer than what was experienced during the 2008 financial crisis. 

In his view, the upcoming crisis is expected to be driven largely by disruptions in energy infrastructure and supply chains, he said in an interview with David Lin published on March 20.

Indeed, his warning comes amid escalating strikes on energy infrastructure in the Gulf during the ongoing Iran conflict involving the U.S. and Israel. 

Disruptions around the Strait of Hormuz, which carries roughly a fifth of global oil, have curtailed exports and pushed crude prices above $100 per barrel on fears of prolonged supply disruptions.

Schachter warned that the destruction of critical energy infrastructure is a major risk. Natural gas facilities could take one to two years to repair, oil fields up to a year, and tanker losses are further straining already tight global supply chains.

He views these as structural disruptions rather than short-term shocks, likely to prolong the economic cycle and keep sustained upward pressure on energy prices, rendering earlier forecasts outdated. 

Schachter indicated that the longer the conflict-driven disruptions persist, the more pronounced the economic consequences will become.

8% inflation risk

Rising energy prices are expected to ripple through supply chains, increasing costs across industries and ultimately feeding into broader inflation. 

In this environment, inflation could climb to between 5% and 8% for an extended period if the conflict remains unresolved. 

Such a scenario would place additional pressure on consumers and policymakers already grappling with elevated costs and slowing growth.

At the same time, the outlook suggested a divergence within financial markets. While higher energy prices may boost energy-related securities, the broader economy could face headwinds from persistent inflation and constrained supply.

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