El-Erian added that the severity of the fallout would depend heavily on the scope of the military campaign and the nature of any Iranian retaliation.

Israel’s military strike on Iran could deliver a negative economic shock at a time when global markets are already navigating elevated inflation, weak growth prospects, and constrained policy responses, according to Allianz SE Chief Economic Advisor Mohamed El-Erian.

“In economic and financial terms, Israel's attack on Iran constitutes a negative shock at an already fragile time,” El-Erian said in a post on X. “With growth and inflation concerns already high, key policy tools limited, and the global architecture shaken, the adverse effects are likely to be both direct and indirect.”

El-Erian added that the severity of the fallout would depend heavily on the scope of the military campaign and the nature of any Iranian retaliation. 

Extending the situation could further destabilize energy markets, sour investor sentiment, and exacerbate geopolitical risk at a time when global coordination is already under strain, he suggested.

Israel has reportedly said that it has planned its operations against Iran for 14 days. In a seven-minute video following the strike, Netanyahu said the operation “Rising Lion” had just begun, and that it could last “as many days as it takes."

Oil prices have spiked in response to the strikes and Iran’s response, with Brent crude rising over 5% in morning trade on Friday. Defense stocks rallied at the open, while shares of major airlines and cruise operators declined amid rising oil prices and renewed travel concerns.

“But prices have been going up in recent weeks, intensifying the stagflationary winds blowing through the global economy,” El-Erian pointed out in a Financial Times article. “Stock markets have slipped, pricing in even higher uncertainty regarding economic activity, with increased risk that consumers and producers become even more hesitant.”

El-Erian also noted that central banks will be forced to stay on high alert as inflation pressures remain unresolved. That, in turn, could delay or limit the scope of interest rate cuts that had been under consideration. "This makes it less likely that earlier and larger interest rate cuts will be triggered in response to any slowdown," he said.

The situation, he concluded, highlights the growing influence of political and geopolitical shocks on economic stability and the continued erosion of the global financial architecture.

The broader markets were trending lower in morning trade on Friday. The SPDR S&P 500 ETF (SPY) fell around 0.6%, while the Invesco QQQ Trust Series 1 (QQQ) dropped more than 0.7%. The SPDR Dow Jones Industrial Average ETF (DIA) tumbled by around 1.1%.

For updates and corrections, email newsroom[at]stocktwits[dot]com.<

Read also: Israel-Iran Conflict Lifts Defense Stocks While Airline Shares Drop On Crude Oil Price Concerns