Investors priced in a 6-week Iraq War but it lasted 8 years and cost $3 trillion. They're doing it again | Fortune

"When the U.S. invaded Iraq in March 2003, Defense Secretary Donald Rumsfeld famously predicted the conflict would last "six days, six weeks-I doubt six months." It lasted eight years, injured nearly 40,000 Americans, killed 4,500, and drained what Brown University's Costs of War project calculates as nearly $2 trillion in direct spending-with veterans' medical and disability payments projected to add $1 trillion more over 40 years."

"Scott Galloway- an NYU professor, entrepreneur, and co-host of the "Prof G Markets" podcast-is drawing that line explicitly. On Monday's episode of the podcast, he and co-host Ed Elson argued that investors' current calm is not savvy risk management. It is, in Galloway's framing, a failure of institutional imagination-the inability of governments and markets to think beyond the first few weeks of a conflict, from the price of reconstruction to the refugees, the blowback, and the political consequences."

"Those trillions ultimately showed up as higher deficits, higher borrowing costs, and a decade of elevated geopolitical risk-a path markets never modeled in 2003. The parallels are not subtle."

Financial markets are exhibiting dangerous complacency regarding current Middle Eastern tensions, mirroring the institutional failure that preceded the Iraq War. In 2003, Defense Secretary Rumsfeld predicted Iraq would last six months, but the conflict lasted eight years, costing nearly $2 trillion in direct spending plus $1 trillion in projected veteran benefits over 40 years—vastly exceeding initial $50-60 billion estimates. Today, markets remain calm despite oil reaching $120 per barrel and Iran naming a new Supreme Leader, suggesting investors are pricing in a brief, contained operation. Scott Galloway argues this represents a failure of institutional imagination, where governments and markets cannot envision long-term consequences including reconstruction costs, refugee crises, geopolitical blowback, and political ramifications.

Read at Fortune