Joseph Stiglitz, a Nobel laureate in economics and professor at Columbia University, warned that the U.S. economy faces the risk of stagflation (a recession amid high inflation) due to the fallout from a U.S.-Iran war.

In an interview on the podcast ‘Monetary Matters’ released on the 11th (local time), Stiglitz said, “Prices are rising primarily because of tariffs, and now because of the war, while growth is slowing.”

He noted, “The U.S. economy has been running on a single-cylinder engine called artificial intelligence (AI),” adding, “This cannot be considered a sound, well-diversified economy.”

He further warned, “Considering shocks to the stock market, oil prices, food prices, and tariffs, the U.S. economy is heading into a very rough period.”

Stiglitz pointed out that even though the United States is a net exporter of oil, rising international oil prices would inflict substantial damage on the U.S. economy.

U.S. energy companies would benefit from a sharp rise in oil prices, but he said expectations that firms will pass their increased profits on to consumers are “close to an illusion.”

Recalling that the world economy suffered a severe downturn during the 1974 Middle East oil shock, Stiglitz said, “By way of analogy, it was as if a grenade had been thrown into the global economy at the time, and it took a long time for the world economy to recover.”

Regarding the AI industry, Stiglitz said, “As companies each seek to become the ultimate winner, they have created a risk of overinvestment,” adding, “If the macroeconomy is not functioning properly, AI companies will not be able to reap massive profits either.”

He went on, “It is highly likely that we are in an AI bubble,” and said, “If the bubble bursts, it will have serious macroeconomic consequences.”