"Dr. Doom" Roubini: Blocking the Strait of Hormuz is a "game of chicken," and Iran will ultimately win

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Tensions in the Strait of Hormuz have risen sharply, rapidly turning geopolitical risk into tangible market shocks.

On April 13, Nouriel Roubini—the so-called “Dr. Doom” for his long-term pessimistic economic forecasts—warned in a Bloomberg interview that the U.S. strategy of blocking Iran is essentially a “game of chicken”. Due to its geographical position and strategic patience, Iran is fully capable of holding out until the end. If the U.S. is unwilling to escalate the conflict with higher-risk military actions, this "half-hearted escalation" will not only fail to achieve its strategic goals, but will also continue to drive up oil prices, depress stock markets, push up inflation, and inflict a heavy price on the global economy.

According to Xinhua News Agency, U.S. President Trump posted twice in a row on social media on April 12, stating that U.S.-Iran negotiations are “progressing smoothly, with most issues agreed upon,” but the crucial issue of nuclear matters remains unresolved. Trump declared that from now on, the U.S. military will “begin blockading all ships attempting to enter or exit the Strait of Hormuz.”

Markets quickly priced in the risks: WTI crude oil surged 8%, approaching the $105 per barrel mark; U.S. stock futures dropped, and bond yields rose across the board.

Blockade Unlikely to Succeed, “Game of Chicken” Remains Deadlocked

In the interview, Roubini said, perhaps starting this war was itself a mistake, but choosing to quit halfway after it has begun would be a strategic disaster. He believes that if Iran manages to control the direction of events, the consequences will go far beyond the current conflict—nuclear proliferation, more missiles, and the spread of warfare drones could turn this into “a nightmare.”

Regarding the current blockade strategy, Roubini considers its logic fundamentally flawed. The blockade can economically strangle Iran, but Iran is able to withstand the pressure for quite a long time, whereas the political and economic costs for the U.S. and its allies will continue to accumulate during this period. He pointed out that unless the U.S. is willing to take more drastic military actions and not merely rely on a blockade, Iran is more likely to be the winner in this “game of chicken.”

Roubini cited historical cases to question the effectiveness of economic sanctions and blockades. He noted that whether it was Venezuela or Zimbabwe, economic and financial sanctions and trade blockades eventually led to regime collapse to some extent, but the process was long and full of uncertainty, and there is no guarantee that the same result would be replicated with Iran.

Market Has Priced in Stalemate, Multi-Asset Pressure Simultaneously

The market cost of this geopolitical stalemate is rapidly becoming apparent. WTI crude oil rose 8% on Monday, breaking $104 per barrel, exposing the energy market’s sensitivity to the situation in the Strait of Hormuz. S&P 500 index futures fell 0.7%, Nvidia dropped nearly 1.5% premarket, and tech stocks were generally under pressure.

Fixed-income markets were also volatile. U.S. Treasury yields rose as safe-haven sentiment intensified, the yield on Japan’s 10-year government bonds rose to 2.49%, the highest since 1997. The dollar strengthened broadly against G10 currencies, with safe-haven sentiment dominating cross-asset trends.

Roubini concluded that if the conflict continues to be stuck in a “half-finished stalemate,” oil prices will remain high, stocks will remain under pressure, bond yields will rise further, consumer and business confidence will be eroded, global growth will slow, and inflationary pressures will stay elevated. He warned: “You may not even get a result, and the world will become worse.”

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