What worries me most about Iran war is interest rates

What worries me most about the Iran conflict is not the rise in oil and gas prices. It’s interest rates

What we see today in the Strait of Hormuz is not a regional problem. It is the trigger for a global price crisis. The economy operates on a basic rule: if the supply of an essential good like fuel drops suddenly while demand remains, the price explodes. And since absolutely everything today—from the bread you buy to the server that runs your company—requires energy to be produced and transported, that price hike ripples into every corner of your life. The real problem isn't just that gasoline is expensive, it’s the risk of how central banks will respond to it

In the 1974 crisis, following the oil embargo, governments made a mistake still studied as the biggest economic "screw-up" of the century. To prevent the economy from slowing down, they lowered interest rates and flooded the market with cheap money. They thought that if people had more bills in their pockets, they could withstand the cost of energy. It was a disaster. The extra money didn't create more oil; it only made people compete for the little oil there was, driving prices even higher. They created stagflation: a cursed situation where prices rose non-stop while the economy stagnated and unemployment skyrocketed. In the end, to stop that fire, they had to raise interest rates to savage levels that ruined millions of people just to halt consumption in its tracks

Today, the European Central Bank stands before that same abyss and has only two options. The first path is cowardice: repeating the 1970s, keeping money cheap, and pretending nothing's happening. This would destroy the credibility of the euro forever—making our currency worth less and less outside our borders—evaporate your savings through inflation, and hand power on a silver platter to nationalist parties that want to break up the EU. The second path is the hardest but correct one: raising interest rates aggressively right now to curb demand

Choosing this path will undoubtedly have brutal consequences that will hit us all. It means even more expensive mortgages and a sudden halt in consumption. In the business world, it implies that many companies in Europe that were staying afloat thanks to cheap credit will go into final bankruptcy. We will see many startups disappear, and far fewer will be created. For the VC and PE industry, which was already reeling since 2023, this could be the death blow. And of course, we would experience a serious and perhaps dramatic correction in the price of assets like housing and the stock market, which will have to adjust to the new reality of money

I'm sorry to be so demoralizing, but the idea is this: the future of Europe is now in the hands of a single entity, the ECB. And regardless of the option it chooses, the question we should ask is whether it still makes sense that, in a supposed democracy, the most critical decision about our lives and our money is made outside the political sphere