Lazard CEO Peter Orszag said the global economy is currently in a “Road Runner moment” where the impact of the Middle East conflict on prices is yet to manifest.

Speaking at Semafor World Economy in Washington, DC, on Monday, Orszag referenced the famous scenes of the American cartoon character Wile E. Coyote stepping off a cliff without realizing that gravity is about to kick in.

Because of the combination of the ships that were already through the Strait of Hormuz before the war began, and existing inventories making up for the drop in shipments, “the impact of what’s happening is not yet manifest itself in most economies,” he said.

“Supply shocks take a very long time to feed through into prices. That was true for COVID. It’s true with regard to tariffs. It will be true with regard to the Middle East.”

If the conflict continues and inventories start running low, the world economy will start to see more pressure on jet fuel, aluminum, helium, fertilizer and other raw materials contained in thousands of products, he said.

Orszag also said that US inflation will likely remain at about 3% to 3.5%,
suggesting it won’t be high enough for the majority of the US Federal Reserve governors to agree to cut interest rates. If rates are lowered under that scenario, “all that would happen is the yield curve would steepen.”