Economist predicts 'a lot of bad things' for markets if Iran war grows

The war in Iran could very quickly turn bad for Americans at home if it continues, economist Steve Rattner warned Mike Barnicle on MS NOW Wednesday morning.

"Wall Street clearly does not like unpredictability or uncertainty. No one does," said Barnicle. "But on the global stage, there's no way of telling how long we will be actively involved on a daily basis in a war in Iran. What happens if this war lengthens out in terms of the United States presence and participation in that war? What happens to those charts behind you right now?"

"A lot of bad things, Mike. A lot of bad things," said Rattner.

For one thing, he said, "The oil prices could spike some more. As I said, I don't think it affects our supply, but it affects the prices people pay at the pump and for their home heating oil and even for their natural gas, because a lot of natural gas also passes through the Strait of Hormuz. And so then you get more inflation, you get the potential for higher interest rates, you get the uncertainty and the fear of what could happen. And yeah, all that is really bad for the stock market."

"The stock market's reaction so far has actually been quite muted," he added. "It was down about 1 percent yesterday. It looks like it will open about flat today. That's a pretty benign reaction, given everything that could have happened. But the potential for a much bigger stock market disruption is certainly right there. If this war were to widen out, or if something unexpectedly bad were to happen to us, to our troops, to the whole Middle Eastern situation."

This comes as the invasion divides President Donald Trump's own base, with many who believed he was the candidate against "forever wars" seeing it as a betrayal or even calling for his removal from office.

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