Is America’s Economy On The Verge Of A ‘Wile-E-Coyote’ Moment?

(Photo by JOHN WESSELS / AFP via Getty Images)

There’s a famous schtick in “Looney Tunes” when Wile E. Coyote runs off a cliff and keeps running, suspended in thin air, but looks down and suddenly realizes that he is about to plummet to the ground.

It’s a perfect metaphor for economies and investors that haven’t quite realized that the illusion of stability is just that: an illusion.

Yves Smith, a former Goldman Sachs employee and financial expert who foresaw the 2007-2009 financial crisis, warned Tuesday that the global markets haven’t yet priced in the reverberating shocks from the war, and that when they do, it might turn into a bloodbath that triggers a deep economic depression.

“Even though most commentary is focusing on the kinetic conflict, financial upheaval could produce even faster and more acute pressure on Trump. The market reaction so far seems similar to the 2007-2008 crisis, where some commentators described the denialism over the accelerating credit market as waiting for the Wile E. Coyote moment, where he remains aloft until he looks down,” Smith wrote Tuesday.

Already, we are seeing some warning signs. The stock market is taking a beating. Oil prices are climbing. And the average national gas price surged to over $3 per gallon overnight from Monday. (RELATED: GOP Could Suffer Same Crisis That Fueled Joe Biden’s Demise: Gas Prices)

A view of the ARAMCO headquarter, the national Saudi Arabian Oil Company, towers in the King Abdullah Financial District of Riyadh on March 3, 2026. Saudi Arabia is the world’s second biggest oil producer after the United States, and Iran ranks among the top 10. The United States and Israel launched strikes against Iran on February 28, with the killing of Iran’s supreme leader, and the Islamic Republic retaliated with barrages of missiles at Gulf states and Israel. (Photo by Fayez Nureldine / AFP via Getty Images)

As I wrote Monday, Iran can wreak economic havoc on the entire globe by targeting oil and national gas facilities with drone attacks. Even if the infrastructure isn’t annihilated, pauses in oil production and repairs will have an impact on the global economy.

Further, although the United States has obliterated many Iranian naval assets, the Strait of Hormuz, a critical passageway for the transportation of crude oil, is effectively closed. Tanker traffic has plummeted, and shipping companies are unable to purchase war risk insurance. China is now reportedly pressuring Iranian officials to keep the strait open to avoid a bigger shock to the global economy.

The closure of the Strait of Hormuz by Iran is sending shockwaves across global energy markets, with Asia expected to face the maximum pain. Full details: https://t.co/pNHSK7MFsp pic.twitter.com/wYyJns6qIU — CNBC (@CNBC) March 3, 2026

The closure of the Strait of Hormuz by Iran is sending shockwaves across global energy markets, with Asia expected to face the maximum pain.

Full details: https://t.co/pNHSK7MFsp pic.twitter.com/wYyJns6qIU

— CNBC (@CNBC) March 3, 2026

“China urges all parties to immediately cease military operations, avoid escalating tensions and safeguard the safety of navigation in the Strait of Hormuz,” Foreign Ministry spokeswoman Mao Ning said Tuesday.

Drivers wait in lines to pump gasoline into their vehicles at a gas station at the Marina Del Rey community of Los Angeles, California on March 2, 2026. Energy prices surged on March 2 as the war in the Middle East led to outages of key energy production operations. In parallel, energy markets are also absorbing a de facto halt to traffic in the Strait of Hormuz, through which about 20 percent of global supply of oil and liquid natural gas travel.The waterway has not technically been closed, but major maritime companies have suspended travel through it as insurance costs soar amid heightened risk. (Photo by Patrick T. Fallon / AFP via Getty Images)

All of this is very bad news for the U.S. economy. As Smith noted Monday, an “additional shock of high energy price and even availability risks a severe economic downturn” for America and even China, which is why Beijing is begging everyone to keep the Strait of Hormuz safe for navigation.

And the news will get worse, unfortunately, the longer the war drags on. This isn’t “doomcasting” or the ramblings of a “panican.” This is just the reality of living in a highly interconnected, globalized economy.

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