Lloyd Blankfein, Goldman Sachs’ senior chairman and former CEO, warned that even if there was a “fix tomorrow,” the damage from the Iran war “continues” and called on investors to prioritize contingency plans amid the turmoil.
In a conversation with CNBC’s Steve Sedgwick on Wednesday, Blankfein suggested that some in the market may be too complacent with their approach to the dispute, adding that trading on the basis that “everything will be resolved” is just as dangerous as saying “it will never be resolved.”
Regarding the Middle East wars, he said: “We know that even if it stopped tomorrow, the stress would continue for a long time anyway because the damage to infrastructure would be so great. Even if there was a solution tomorrow, there’s no reason to think there will be a solution tomorrow.”
The February 28 US and Israeli attack on Iran has escalated into a regional war, with Iran targeting the energy infrastructure of neighboring countries and severely disrupting traffic in the Strait of Hormuz, a key waterway for oil and gas.
Lloyd Blankfein, former CEO of Goldman Sachs, speaks at the Goldman Sachs Analyst Impact Fund competition at Goldman Sachs headquarters in New York City, USA, on November 14, 2023.
Brendan McDiarmid | Reuters
Blankfein pointed to the volatility in energy markets in recent weeks as investors seek to hedge prices from the fallout from the conflict and the lasting impact of disruptions to global oil supplies. Against this backdrop, he said investors should avoid confidence trading, opt for a more cautious approach and be “very nimble and very protective” of their positions.
“You put up a hedge, and if things go the other way, that hedge could be worthless tomorrow,” Blankfein said. “I think people should be good emergency planners at this point.”
In a wide-ranging interview, Blankfein, who guided Goldman through the 2008 global financial crisis as CEO, also reflected on the broader U.S. financial situation and potential risks arising from private markets.
He said Iran’s pre-war investment backdrop was “more of a tailwind than a headwind,” pointing to its strong growth and low interest rate trajectory. “It’s all become secondary and secondary to what’s going on with the war and energy prices,” he says.
However, questions remain about the accuracy of rating marks in private market fund portfolios, it said, adding that the assets were untested as stock markets rose.
“We need a count. We haven’t done one yet. The longer we wait between counts, the worse the situation could potentially be,” he added.
