'Terrible': Nobel laureate economist warns Trump may trigger oil crisis dwarfing 1970s

Nobel Prize-winning economist-turned-political commentator Paul Krugman offered a grim assessment of America's economic prospects if President Donald Trump's war with Iran continues.

Krugman, who wrote a similar warning on his Substack, told MS NOW's Chris Hayes on Tuesday that the longer the war goes on, the greater the likelihood of a global energy crisis that will make the 1970s look like playtime.

"Professor, what is your read, I guess, topline on the kind of macroeconomic global economic reverberations of the big supply shock we're seeing right now with oil?" asked Hayes.

"Okay, this is potentially really terrible," said Krugman. "The current price is still assuming basically, traders are assuming that this will not go on more than another week or two. If it goes on longer, then this is — 20 percent of the world's oil flows through the Strait of Hormuz, and there's really no other way for it to get to where it can be used."

"That's enormous," Krugman continued. "That's a much bigger shock to world oil supplies than the oil shocks of, of the, of the 1970s. This is just a gigantic disruption to world energy supplies. And the price can go easily, much, much higher than where it is now if it's — if it's sustained. I mean, this is — this is basically impossible and that's nasty."

Krugman did have a bit of good news to moderate his fears.

"Now, the world is less oil dependent than it was in the 1970s," he said. "We, you know, the U.S. economy is about four times as big as it was in 1973. But we burn about the same amount of oil, so we're less exposed to that. But it's still this is if you were going to concoct a recipe for somehow revisiting all of the bad things of the past 60 years of U.S. economic history, it would be what's happening right now."

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