The war in Iran is being treated by financial markets as a systemic event rather than a local conflict.

In this episode, Professor Harvey outlines a framework for understanding that distinction. He distinguishes between geographically contained wars and those that intersect with critical nodes of the global economy. Iran sits at the center of energy transit routes, regional trade networks, and broader strategic relationships, making the potential spillovers materially different from more isolated historical conflicts.

He identifies several layers of uncertainty shaping market behavior: renewed inflation risk from disrupted oil flows through the Strait of Hormuz, the economic interdependence of surrounding countries, questions about whether other major powers could alter their posture in response, the duration of the conflict, the stability of political transition, and the fiscal capacity of the United States to sustain prolonged engagement given elevated debt and deficits.