How the Iran War Could Trigger a Global Credit Crunch

The story of the debt crisis begins with the 1979 Oil Shock, which doubled the price of oil overnight and created the conditions for the anti-inflationary Volcker Shock. The final nail in the proverbial coffin was Saddam Hussein’s 1980 invasion of Iran and the decision by the Gulf monarchs to shift their investments from banks overseas to funding Iraq’s war against the newly-formed Islamic Republic of Iran. This combination of an oil shock, credit drought, and inflationary pressures forced sovereign borrowe ...