①Allianz Chief Economic Advisor Mohamed El-Erian has warned that the Middle East conflict, rising oil prices, weak employment reports, and inflation data are increasing the risk of stagflation in the global economy; ②He pointed out that investors may be underestimating risks such as pressures in the private credit market, potential bubbles spawned by the AI boom, and the capacity of the global bond market to absorb new debt being tested.
Cailian Press, March 11 (Editor Huang Junzhi) Over the past two weeks, the Middle East conflict has dominated headlines across major media outlets, with investors closely watching rising oil prices and falling U.S. stock markets, which have heightened concerns about inflation and economic slowdown.
Mohamed El-Erian, Chief Economic Advisor at Allianz and former Chief Investment Officer at PIMCO, has issued a new warning that while Iran and its associated inflation risks are the primary focus for investors, three other market risks are quietly escalating.
In his article, he noted that with the rise in oil prices caused by U.S.-Iran tensions, combined with surprisingly weak employment reports and recent inflation data, the global economy is experiencing ‘stronger headwinds of stagflation,’ intensifying concerns about the economic situation.
“Despite the growing risks, many sectors of the market have continued to view the escalation of the Middle East conflict as a ‘skin-deep wound’—only causing temporary and quickly reversible disruptions to an otherwise resilient global economy,” he wrote. “After all, this perspective has proven correct for the shock-filled year of 2025.”
This renowned economist also stated that the performance of U.S. Treasury yields has not changed as the market typically expects. The 10-year U.S. Treasury yield remains roughly at the same level as it was a month ago. While some may consider this unimportant, he believes that this phenomenon itself is precisely worthy of vigilance.
He wrote, “This indicates that the market is underestimating the accumulating risks that require close attention from policymakers and long-term investors.”
“In both the real economy and financial sectors, negative factors do not offset each other; they only continue to compound.” He explained.
Beyond the U.S.-Iran conflict, El-Erian also highlighted three risks affecting the outlook that investors may be underestimating:
The primary risk is pressure in the private credit market.
He specifically mentioned the recent remarks by Marc Rowan, CEO of Apollo Global Management, regarding a “shakeout” in private credit, describing it as a typical sign of overexpansion within the industry.
For weeks, executives in the private credit sector have faced investor scrutiny over whether the $1.8 trillion industry can withstand sustained pressure if artificial intelligence disrupts the software industry in the coming years. Business development companies have recently experienced redemption pressures due to investor concerns.
Some economists have compared the recent pressures in the private credit market to those before the 2008 financial crisis, but El-Erian noted that the current situation is far less severe.
The second major risk relates to potential bubbles arising from the artificial intelligence (AI) boom.
El-Erian pointed out that substantial amounts of capital continue to flow into the technology sector, and the market’s optimistic expectations about AI may be creating new bubble risks. He also highlighted Block’s recent layoffs as a reminder that the potential impact of AI on the labor market should not be underestimated.
Earlier this year, concerns over AI replacing human labor and causing disruptive changes to the global economic structure unsettled stock markets. A widely circulated hypothetical “doomsday scenario” analysis on Substack also caused temporary market panic.
The final risk involves testing the capacity of global bond markets to absorb additional debt as inflation rises, which could increase borrowing costs for governments worldwide.
In conclusion, El-Erian remarked, “Each factor alone does not seem sufficient to trigger systemic risk. However, together they can form a self-reinforcing and destabilizing force.”