Economic Roundtable: Structural Fallouts From the Iran Conflict

April 15, 2026

AI Summary

5 min read

The episode opens with Seth Carpenter, Morgan Stanley’s global chief economist, convening his regional team to examine how the Iran conflict is reshaping the global economy beyond the immediate energy shock. The conversation moves from oil prices to structural questions about labor markets, AI investment, supply chains, and Europe’s industrial vulnerability. The core tension is whether this shock will merely slow growth or permanently alter the trajectory of key economies.

U.S. Structural Trends Are Holding—For Now

Mike Gapin, the U.S. economist, reports that the positive structural forces in the American economy—AI-driven capital expenditure, rising productivity, and strong consumer spending—remain largely intact. He argues that AI capex is “orthogonal” to the oil shock so far. The main risk is to consumption: higher gasoline prices squeeze lower- and middle-income households, acting as a “modest headwind” rather than a hard stop. However, Gapin warns that if oil were to spike to $150 a barrel or more, the situation would change dramatically. At that threshold, he says, “you do get significant demand destruction,” not just from gasoline but from weak asset markets and a pullback in hiring, raising the risk of a U.S. recession.

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What you'll learn

1 (00:00) **Episode Introduction and Framing** - Host Seth Carpenter introduces the roundtable with three Morgan Stanley chief economists, setting up a structural deep-dive beyond yesterday’s immediate energy shock discussion.
2 (01:15) **US: Oil Shock as a Structural Headwind, Not a Hard Stop** - Mike Gapin argues that current oil prices are not disrupting the US’s positive structural trends, such as AI capex and productivity.
3 (02:56) **AI’s Small but Real Effect on US Labor Markets** - Gapin presents early evidence that AI is beginning to push up unemployment in exposed occupations, but the macro effect remains tiny.
4 (04:24) **Asia’s AI Supply Chain: Paying Up for Inputs, but Cyclical Risk Looms** - Chetan Ahya explains that Asian tech supply chains (Korea, Taiwan) are currently absorbing higher costs for helium and sulfur without production disruptions.
5 (06:00) **Europe: The ‘Just the Shock’ Economy** - Jens Eisenschmidt contrasts Europe’s position, noting it lacks the AI boom or the AI supply chain that buffers the US and Asia, leaving it fully exposed to the energy price rise.
6 (08:14) **The Structural Legacy of the Energy Shock in Europe** - Eisenschmidt confirms the current shock is a structural headwind, not just a cyclical one, as it reinforces Europe’s existing weakness in high electricity prices derived from fossil fuels.
7 (09:27) **Quick-Fire Scenarios: Recession Risk, Baked-In Damage, and Nonlinearity** - The economists each answer a high-impact scenario question to cap the discussion.

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Guests on this episode

Seth Carpenter

Show Notes

Our Global Chief Economist Seth Carpenter concludes the two-part discussion with chief regional economists Michael Gapen, Jens Eisenschmidt and Chetan Ahya on the second order effects of the energy shock from tensions in the Middle East.

Read more insights from Morgan Stanley.

----- Transcript -----

Seth Carpenter: Welcome to Thoughts in the Market. I'm Seth Carpenter, Morgan Stanley's Global Chief Economist and Head of Macro Research. And once again, I am joined by Morgan Stanley's chief regional economists: Michael Gapen, Chief U.S. Economist, Chetan Ahya, the Chief Asia Economist, and Jens Eisenschmidt, our Chief Europe Economist.

Yesterday we focused on the immediate impact of the Iran conflict, how the energy shock is feeding through into inflation, and, as a result, shaping central bank decisions across the U.S., Europe, and Asia.

Today we're going to go a level deeper and talk about some structural issues in the global economy.

It's Wednesday, April 15th at 10am in New York.

Jens Eisenschmidt: And 3pm in London.

Chetan Ahya: And 10pm in Hong Kong.

Seth Carpenter: So, even as we're waiting to see whether or not oil prices stabilize following a temporary ceasefire – or not – the broader effects are still working their way through the global economy. Labor markets, supply chains, and then, of course, back to the more longer-term structural themes like AI driven growth.

So, the question, I think, has to be: what does this shock mean, if anything, for the next phase of global growth? And does it reshape it? Does it change it, or do we just wait for things to go through?

Mike, let me come to you first. One risk that we've been focusing on is whether this kind of shock really changes some of the structural positives in the U.S. economy. The U.S. has been, I would say, outperforming in lots of ways. We've had this AI driven CapEx cycle. We've had rising productivity; we've had strong consumer spending. What are you seeing in the data about those more structural trends?

Michael Gapen: I think what we're seeing in the data right now is evidence that oil is not disrupting the positive structural trends in the U.S. I think AI CapEx spending is largely orthogonal to what we've seen so far. It doesn't mean that we can't see negative effects, particularly if oil rises to say $150 a barrel or more where we think you might see significant demand destruction.

But with oil where it is right now, I would say the evidence is it will probably weigh on consumption. Gasoline prices are higher. It's going to squeeze lower- and middle-income households that way. But so far, the labor market appears to be holding up. And business spending around Cap