The Rest Is Money 260. Iran War: why the poor will suffer
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Mar 12, 2026 
Mohamed El-Erian, economist and Allianz chief economic adviser, offers urgent analysis of the Iran war’s hit to growth and inflation. He explains why markets underreact to catastrophic risks. He outlines how energy, food and unemployment will widen inequalities and why UK policy needs targeted support and a coherent growth strategy.
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Markets Are Too Optimistic About A Quick Resolution
- Markets currently price an ~80% chance of a quick US-declared victory and rapid restart of oil, which El-Erian thinks is closer to 50%.
- He warns restarting production and stopping asymmetric conflict is slow and uncertain.
Protect Low Income Households With Targeted Support
- Governments should support lower‑income households during sustained energy price shocks, but fiscal headroom limits choices.
- El-Erian notes UK borrowing costs are already higher, so support requires difficult fiscal tradeoffs.
War Can Expose Hidden Financial Fragilities
- The conflict can expose multiple UK fragilities: high debt, rising unemployment, low productivity, and stress in shadow banking/private credit.
- El-Erian warns small private credit strains can grow large and threaten the wider economy.