Here's what smart people in markets are saying about the US-Iran conflict

• The US and Israel's strikes against Iran roiled financial markets on Monday.
• Oil prices surged and stocks were rattled in volatile trading as the week kicked off.
• The economic fallout could still be limited, according to top experts in markets and economics.

Markets are still reacting to the latest conflict in the Middle East on Monday, with sharp moves in oil, stocks, and safe havens like gold.

Top Wall Street analysts were eyeing the potential for the fallout to spill over into the broader economy if the war drags on. Impacts on inflation and economic growth were being assessed as the world digested news of the war with Iran, which entered its third day on Monday.

Here's what smart people in markets and economics are saying about the US-Iran conflict.

Paul Krugman, Nobel economist

Krugman used the 1979 Iranian revolution, which sparked an energy crisis for the US, to illustrate why the current conflict could threaten the stock market's growth, potentially popping the bubble in asset prices.

His thesis centers on the argument that the stock market looks significantly more like a bubble than it did in 1979, making it more vulnerable to geopolitical shocks. However, he also thinks the fragile financial system is particularly vulnerable due to the private credit bubble, posing another major risk.

"Today many observers have been warning about potential risks to financial stability, most urgently from private credit," Krugman wrote. "Could the Iran war trigger a broader financial crisis? I don't know, but it doesn't seem alarmist to be worried."

He also noted the risk to the global economy stemming from disruption to the Middle East region, and not just because of its importance as an oil exporter.

"Dubai in particular is an important node in the global financial system, as well as playing host to many extremely rich people who thought they had found a safe haven," the economist said. "To the extent that the war disrupts this new role for the region, that will be another risk to the world economy."

Mark Zandi, chief economist at Moody's Analytics

Zandi has issued a handful of highly bearish takes in the past year, regarding both the US economy and the global financial system. While he acknowledged that the economic fallout from the strikes has been muted so far, his outlook is still cautious.

"Global oil prices are up about $5 per barrel, and U.S. stock prices are down about 1% in immediate reaction," he stated on X. "There is no economic upside to any of this, as the higher oil prices will weigh on growth and push inflation higher."

That said, Zandi added that if market conditions stabilize near their Monday prices, the overall fallout from the attacks could remain limited. He predicts negative but minor consequences if the increase in oil prices isn't much greater than Monday's price action.

Mohamed El-Erian, former Co-CIO at PIMCO

The leading economist and former co-CIO of investment management firm PIMCO has been bearish on the US economy lately. Following the US attacks on Iran, though, he sees a clear shift in the ways markets are responding to major geopolitical shocks.

"After the classic immediate reaction, markets are starting to differentiate within and across segments in a manner driven mainly by fundamentals and, to a lesser extent, technicals," he noted in an X post on Monday. "This includes US stocks where the NASDAQ has just turned positive for the day."

El-Erian added that the global economy may be nearing a stagflationary phase, driven primarily by rising geopolitical tensions. But, like Zandi, he maintains that the overall impact will be determined by the duration and length of its escalation.

Steve Eisman, former managing director at Neuberger Berman

Immortalized in Michael Lewis's financial crisis epic, "The Big Short," Eisman took to the airwaves on Monday to opine on the impact of the latest war in the Middle East.

The famed trader said he isn't concerned about the long-term impact of the Iran strikes on financial markets. On the contrary, he sees it as a positive catalyst.

Eisman praised Trump's decision to strike Iran in a CNBC appearance but noted that it will take time for markets to fully recover. He added, though, that he wouldn't change a single trade he's made recently due to the conflict.

"Because of what's happening, oil prices are obviously up," he said. "But if it goes well, two months from now, all prices will be back to where they were."