William Blair macro analyst Richard de Chazal unpacks the market implications of the U.S.–Iran conflict, discussing how the war is reshaping inflation and growth risks and challenging central banks’ playbooks, and why markets may be underpricing the possibility of a more prolonged disruption. Richard also touches on emerging stress in private credit beneath the surface.

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Podcast Transcript

00:21, Chris T

Hi everybody. Today is Friday, March 27, 2026. Welcome back to another episode of Monthly Macro.

Once again, another exceptionally busy month for markets. There's no shortage of macro headlines competing for investors’ attention. We've started to see some early stress emerge in parts of the private credit market, but that's not the big story right now. I think it's pretty obvious that, at least, that story has been quickly overshadowed by a much bigger development. The U.S. war with Iran, which broke out toward the end of February and has rapidly become the dominant macro variable.

So, joining me, as always, to discuss is William Blair macro analyst Richard de Chazal.

Richard, thanks for joining me. Let's start with the conflict itself. Why, would you say, has this war started? And what does a win actually look like?

 

01:08, Richard D

Well, you know, that’s kind of the big question. You know, I think it's not actually clear what a win is here for the U.S. I mean, I think it's kind of clear what it is for Israel. It, you know, it wants to remove a pretty significant nuclear threat that's, you know, on its doorstep.

But I think it's not entirely clear what the goal is for the U.S. here. You know, is it just to remove that nuclear threat, as well? And, you know, if that's the case, that seems like it's probably been achieved. You know, or is it full regime change, you know, or is it actually something much bigger, which, you know, could be or seems to be maybe the control of the Strait of Hormuz? You know, and I think if that's the case, you know, we, sort of, have to look at this as, kind of, one piece of a much bigger, kind of, geostrategic puzzle.

You know, and if the U.S. was actually to, you know, gain control of the Strait, I think that would actually be a pretty big win for the U.S. You know, remember that since 2019, the U.S. has been energy independent, so it's a net energy exporter. I think of oil in 2019, gas, I think 2017. But, you know, I think what it also wants is for national security purposes to really have control over what a lot of people are talking about now is the, sort of, the world's major “choke points”. And I think what we're seeing in the U.S. is it's been pretty effective in, you know, last few years of getting, say, effective control over a lot of those.

So, the Red Sea, Panama Canal, maybe the northern route. It seems like, you know, we can get a deal with Greenland, you know, now Venezuela and, you know, what is it, the Donroe Doctrine over South America, as well. You know, but if this is really about, you know, gaining control of the Strait, it doesn't seem like this war is going to be wrapped up, like just in a month.

It could take a little longer. You know, you and I were chatting earlier, Chris, that, you know, The Wall Street Journal is now reporting that they're going to be sending an additional 10,000 troops to the region, which, again, doesn't suggest that they're going to wrap this up, you know, too quickly. But, you know, then the president could just turn around and say, you know, our work here is done, and we're going home.

So, I think, you know, unfortunately, it's the fog of war. And there's, you know, a lot that's unclear at the moment.

 

04:16, Chris T

What are the main implications, do you think, of this conflict for inflation, economic growth?

 

04:20, Richard D

Yeah. Well, again, you know, it's going to depend on how long it lasts. And I think the reality is, the longer it lasts, the more disruption you're going to get to global supply chains and the worse the impact is going to be on both growth and inflation. So, it's not just energy. It's fertilizer or helium. So, you know food prices start to rise. Availability of fertilizer is already being, what would you call it? Squashed or reduced. So, you know, we're in the planting season certainly in Europe and in Asia. Helium, we're reading a lot about helium these days. So, you know, if that supply starts to get disrupted, that feeds into a lot of things like health care. MRI's need helium, semiconductor chips. So, you know, all of that thing, you know, the impact starts to broaden out. I think for growth, I think it's, sort of, manageable right now. But if you see oil is starting to go up, I don't know, $150 a barrel, if it's there for a while. Those probabilities around inflation and around growth start to shift more towards the kind of recessionary side of things which we're not really pricing in just yet but thinking about them.

And that's the growth side. And then on the inflation side, the standard view is to, kind of, look through supply shocks. We remember that, you know, oil price increase, it's a tax on consumption. It's not too much money chasing too few goods. It's not a monetary phenomenon. It's a relative price change.

So, if you have to pay more for gas at the pump, you can probably spend less, you know, the cinema or dining out. I think for most economists, they, kind of, see it as, as, kind of, like a wave that sort of rises and then falls.

But I think the risk is that if you start to see the price of everything rising, then it's no longer just that wave. It's actually, you know, the whole tide is rising. And in that case, economists would, sort of, say, well, it's not just the oil shock. Something else is going on here. And I think this is where economists, kind of, differ a little. So, most would look at, you know, the oil shock, say, okay, that's going to result in a, you know, price increase.

But what happens after that is, kind of, the debate. And most central banks basically say that that, sort of, other thing would be if these, sort of, inflationary expectations were de anchored, which means that households don't see this as, kind of, a temporary one-off price shock. You know, they start to see it as something more, and then they demand higher wages and salaries and that kind of just prolongs the shock of higher inflation.

And I think, you know, other economists would say, well, really, it's not about inflationary expectations. It's about what the fiscal and monetary response is to that price shock. So, if fiscal policymakers start to introduce policies to, kind of, soften the blow for the population, like, you know, writing COVID checks or reducing the VAT on gas at gas stations, you know, and I think that's what they're starting to do a little bit of.

So, in Spain, they've announced a $5 billion relief package to lower VAT on lots of, you know, energy prices. In Asia, they, you know, who's really at the forefront of this because they get a lot of their energy and other stuff passes through the Strait. They've, sort of, tackled it, which, I think, a little bit more sensibly on the demand side, where they're, sort of, reducing hours worked, you know, saying to workers “you can work from home, but you have to turn down your air conditioning. You can't have it below a certain degree.”

But the bottom line is, I think what we know for sure is that, you know, the next couple of months, we're going to see high inflation readings on the headline rates. It's going to be above 3%. But then, you know, how far that continues is, again, it's going to depend on what those government responses are going forward.

 

09:29, Chris T

How do you think the Fed and other central banks are viewing this backdrop?

 

09:33, Richard D

Yeah, I think it's pretty much their worst nightmare. So, a stagflation scenario, and even if, this is definitely not 1970’s stagflation, so maybe we sort of call it stagflation lite, which is, you know, you get a jump in inflation on one side and then you get growth being pushed down on the other side.

And then you have the age-old question for the central bankers is which one of these do I address? And again, the, sort of, standard textbook response is where you, kind of, do nothing. You, sort of, treat it as a short-term shock. You look through it. But again, for the central banks, their thinking is that's only contingent on those all-important inflationary expectations being anchored down, which allows them to do nothing.

But I think the problem today is maybe two-fold. First is that we've already had four of these so-called one-off shocks to inflation. We had the COVID, we had a Russia invasion of Ukraine, we've had a recent immigration or de-immigration shock, we've had tariffs, and now this. And I think the problem is that households don't just see this as individual separate temporary waves.

They just see prices staying high or rising in their, you know, weekly grocery shop. So, they just see the tide is rising. And I think the problem at the moment is, therefore, that these, sort of, inflationary expectations aren’t that well anchored. So, I'd say that's the first thing. And then the second thing, I think, is that, you know, the inflation regime has changed since COVID, since 2020.

I think from about 2000 to 2020, there were very few supply frictions in the economy. So, there was plenty of labor, plenty of capital, and the inflation risks were really only asymmetrically skewed to the downside. Whereas today, I think we're finding that the supply side, there's a lot more friction in there, supply chains are not quite as efficient as they were, and those inflation risks are more symmetric. And, I think, you know, so that's one thing.

And then the other thing is, I think, even before the war erupted, if you look at inflation data and a lot of the core inflation data, it was actually, kind of, moderately re-accelerating before that. So, you know, again, I think there's, sort of, a reason for the Fed to be somewhat cautious here.

So, in terms of their response, I mean, I think, it's, sort of, a four or five step process where one and they seem to be following this playbook, which is basically one, you know, sound less dovish, which is what we, you know, we're seeing from guys like, Governor Waller, who is a super dove. He's, kind of, taken a more symmetrical response.

You remove forward guidance around expected future rate cuts, which they’ve kind of done. And the market has certainly done that for them.

And then step three would be talking about potentially raising rates.

Step four would be actually raising rates.

And then step five would be like to respond through the back end to, you know, the weaker growth which is been coming about by those higher energy prices and by the potentially higher interest rates, which, which you've, instituted.

So, I think the Fed is, kind of, sitting on step two. They’ve, sort of, pulled back the guidance on rate cuts. The futures market in for the Fed is edging towards step three where they're starting maybe to price in seeing a little bit of a rate increase, possibly.

But, I think, in Europe you have the ECB and the Bank of England. They're already on step three. And they're, you know, they're talking about rate increases. Some of them are talking about as soon as next month. And they're clearly hoping they don't have to do that. But, I think, for Europe, the difference is, you know, they're not a net energy exporter like the U.S. is there. So, there's kind of less cushion there. And they're already being impacted by the Russia-Ukraine energy shock, natural gas, storage levels, I was looking at heading into this, we're actually pretty thin. So, there's not a huge buffer there for them to fall back on. And then, the other thing is, you know, remember that commodities are still mainly priced in dollars, so they have to sell euros to buy more dollars, which depreciates your currency, which gives you more inflationary pressures.

And then they have to use those to buy more expensive oil where the prices have gone up. So, they, kind of, get this, sort of, triple whammy impact on top of, you know, a currency, higher commodity prices, potentially higher interest rates. So not very fun at all for Europeans.

 

15:25, Chris T

And how would you say the market is pricing all of this in right now?

 

15:29, Richard D

Yeah, I mean I think markets seem to be pricing in a relatively quick end to the conflict. I mean, I think if we were expecting a fairly protracted conflict, one that actually leads to say, energy prices $150 a barrel for a sustained period, then those inflation probabilities shoot up. You know, right now I think there's sort of 25%, 30%. Then I think you see a much more severe market reaction.

So, you know, right now, the market, I was looking at, is down from its two year high, is down about 5%. I think year to date it's down around 3.5%, something like that. You know, historically during recessions the market goes down 20%, 30%, right? So that's notable. Europe is down about 10%. So, my point is that I guess there's still some downside risk then.

And but, once again, you know, we're, sort of, tied to this mercurial president who, you know, he is very sensitive to the behavior of financial markets.

Yeah. Yeah. Well, I mean, I think the Treasury market, as well, you know, I think, you know, Treasury yields have gone up. I think they're worried about, you know, the inflationary consequences of this.

I think they're also a little bit worried about the budgetary consequences of this. I think we just saw another 200 billion requests for more government military spending. So, the risk premium has moved up a bit. But then, actually, you know, I was thinking about this too, but then actually, on the flip side, you know, so Treasury yields have gone up, prices have gone down. But there's actually quite a bullish story if things do suddenly go really wrong. So, if the street stays closed for a while, if energy supplies really do start to get cut off, and then that forces activity to weaken quite sharply. That's actually obviously very bullish for, those Treasuries.

So, I don't think that's the story at the moment. But, you know, it's another, you know, you're playing with scenarios here.

 

18:00, Chris T

At the beginning I touched on, you know, these private credit issues. Investors are getting nervous about gating, redemptions and transparency…figured we just touch on that a bit. What's your view there?

 

18:11, Richard D

Yeah, clearly I think, you know, it's something that's bubbling under the surface. I think it would be fully on the surface were it not for the war, which, I think, exactly what you mentioned earlier. You know, I think the problem with the private market is that it's very opaque. We don't have a lot of data on it.

You know, the funds don't report in the same way public companies do. So, they don't mark to market their funds, their mark to model. So, I think from a big picture perspective, sort of the way I'm seeing this is, you know, how did this how did this come about? So, you had the global financial crisis and the response to the GFC was Dodd-Frank.

Let’s massively regulate the banks, so they don't do all that bad stuff. Well, you know, again, the same way they did it before. And I think what that has resulted in is banks still have the cash. And what they do is they take that cash and put it off balance sheet by giving it to private market, which doesn't have, as much regulation.

And then, that, you know, takes it off their balance sheet. You know, it allows them not to, you know, build up as much capital. So, I think, that's, you know, they look safer. So, I think that's basically what, what they did. And I think what that resulted in was kind of this big boom in the private lending space.

And then we had COVID, then rates went down to effectively zero again. And I think these private lenders had a ton of money to lend at super low rates. And you got a situation of too much money chasing too few assets. And then here we are, sort of, five, six years later, those funds are starting to mature, and investors are starting to ask where their returns are.

And, I think, you know, these funds look great, and lending look great when the Fed funds rate was, sort of, around zero. And, you know, it's not so great when it's 3.5% to 4%. And it could get even worse if, you know, something bad happens due to the war, and inflation, and higher rates. So, I think investors are saying, okay, a little bit nervous here.

You know, you've got this thing Mark-to-model. You're saying it's worth $100. But I actually think it's probably worth $80. You know, why don't you give me back my money at $100, and I'll happily take it, and, you know, I'll go do something else with that.

And then, I think, the funds are saying, well, hang on a minute. You know, we'd really love to do that. But remember, you signed a deal with us that, you know, you don't get redemptions, or very limited ones, you know, until that term ends, so, sorry.

You know, you're going to have to wait, you know, and I think that's making investors nervous. And, you know, as soon as you start telling someone you can't have it, then you probably want it more.

And then, I think, you're mixing up retail investors in the whole mix because they've been bigger buyers of a lot of this stuff as opposed to maybe, the larger asset managers who can, kind of, handle this. So, my point is, I think there's probably some bad investments, almost certainly some bad investments that have been made.

There's almost certainly going to be some more pain to go through. But then from the, sort of, big macro perspective, the question is, does this pose, you know, a major systemic risk? And I think the answer to that at the moment is, sort of, a cautious no. You know, I think, you know, obviously the trouble with these things is that suddenly you start digging in and the inter linkages with these things tend to be a lot tighter than you thought they were at the time.

And because this is, sort of, private capital, we don't have that information. But I think what seems to be somewhat comforting is the fact that you don't have, kind of, this duration mismatch that you had during the global financial crisis, where you had basically a bunch of banks that were borrowing short, lending long, then there was a bit of a panic.

You can get this, kind of, run on that short term borrowing. And then banks find themselves very heavily exposed and forced to sell assets to pay back those short-term loans. And, I think, in the private space you're, sort of, it's duration matched, if you will, they're, sort of, taking your money for the longer term and matching those against the assets that they're procuring.

And then I think the second thing is that the amount of leverage being used here is relatively low, it seems low, right? So, you know, when a bank has the money, it can leverage that up, say 10 or 12 times. But the private lenders either don't leverage it at all or maybe one, one and a half times. So, you could argue that banks taking that money off their balance sheet and putting it into the private market is actually de leveraging the whole financial system, right?

So, I think one, we know that banks are less exposed here. They're pretty well regulated. You know, they have a pretty good capital cushion. You know, some of the other lenders may be a little bit more exposed. I think life insurance companies are a little bit of a concern here, particularly the ones that are owned by private equity.

So, if there is one, you know, threatening channel of contagion, I would be looking there. But again, at the moment, it feels like we're, sort of, in for a bit of pain there, but definitely not, sort of, 2008, 2009, sort of, big systemic risks.

 

25:01, Chris T

All right. Well, Richard, this has been very helpful, as usual. Thanks for walking us through, and thanks, everyone, for listening. We'll be back next month with another episode of Monthly Macro. Take care.