Ken Griffin Warns Global Recession 'Inevitable' If Strait Of Hormuz Stays Shut: Flags 'Mistake' In Iran Strategy

As America's blockade of the Strait of Hormuz continues to mount downward pressure on US equities, Citadel Advisor's Ken Griffin believes the world faces a full-blown recession if the Strait remains closed for the remainder of this year.

Griffin said at the Semafor World Economy conference in DC that if the Strait is closed for the next six to 12 months, the 'world is going to end up in a recession,' and there's no way to avoid that.

In such a scenario, Griffin believes nations would rapidly transition to renewable energy sources, including wind, solar, and nuclear, while trying to minimise reliance on fossil fuels. Griffin noted that recession risks are already on the rise due to the global energy shock that is now unfolding.

The billionaire investor added that high recession risks would hamper the demand for goods and services as well as compel central banks to make very difficult decisions related to monetary policy.

'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,' Griffin stated.

How Griffin Sees the American Brand Today

When asked about the effect of the Trump administration's foreign policy on the American brand, Griffin said the impact was mixed. He added that the government executed the ouster of Venezuela's leader with 'incredible grace,' but it created 'undue confidence' about implementing regime change in Iran.

'We did a very poor job of messaging to the world' about the US campaign in Iran, Griffin noted. '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,' he explained.

Citadel is among the hedge funds impacted by volatile US bond markets in March. The firm's global fixed income fund fell 8.2%, and its credit portfolio manager Zachariah Barrett also departed the firm after a string of losses, according to Bloomberg.

Griffin Accuses Trump Administration of Enriching Itself

Earlier this year, Griffin said in a conference hosted by The Wall Street Journal that members of the Trump administration are framing policies to enrich their families, which comes as a rare rebuke from the major Republican donor.

'This administration has definitely made missteps in choosing decisions or courses that have been very, very enriching to the families of those in the administration,' he said. 'That calls into question: is the public interest being served?'

Griffin noted that the financial benefits flowing to the administration's family members troubled him. 'One of the things you want to believe is that those who serve the public interest have the public interest at heart in everything they do,' he said.

The hedge fund manager has donated millions of dollars to Republican political groups during the last presidential election, according to OpenSecrets. However, he did not endorse US President Donald Trump and is now a vocal critic of the administration.