AI and US-Iran Conflict at Stake? Wall Street Veteran Expert: Financial Crisis is Approaching, More Severe Than the Great Recession!

An experienced American financial expert who accurately predicted the 2008 financial crisis states that the risk of a new financial crisis is brewing and could be even more severe than the Great Recession of 2007-2009.

Richard Bookstaber, a senior Wall Street figure and author of The End of Theory, which highlights the fragility of the financial system caused by tight coupling and complexity, is known for forecasting the 2008 crisis.

He has decades of risk management experience at firms like Morgan Stanley and Bridgewater, and worked at the U.S. Treasury and the Securities and Exchange Commission after the 2008 subprime mortgage crisis.

In his latest article, Bookstaber warns that multiple overlapping stress factors in the financial markets not only recall the Great Depression but also suggest that the next crisis could be even more severe.

“We are back in a risky period filled with pressures that could trigger a major financial crisis. I used to tell young colleagues they would never see a recession like 2008 again, but now we have to worry that the next crisis could cause even greater damage,” he wrote.

In the article, Bookstaber lists four independent yet interconnected stress factors threatening the financial system.

1. Private Credit

In recent months, concerns about the private credit market have intensified as asset management giants like Blue Owl, BlackRock, Blackstone, and Morgan Stanley restrict redemptions from certain funds. These restrictions have sparked fears over liquidity and caused investors to rush to sell, leading to market panic.

Bookstaber notes that since the 2008 crisis, corporate dependence on institutional lenders has increased.

“These loans are rarely traded, which makes investors uncertain about their true value and whether they can be easily sold if conditions worsen,” he wrote.

Economist and Allianz Chief Economic Advisor Mohamed El-Erian said that the freeze on private credit redemptions could be a “canary in the coal mine,” similar to the moments before the 2008 financial crisis. Fidelity also warned that “we are witnessing a real-time unfolding of a financial crisis.”

2. Artificial Intelligence Risk Exposure Worsens Credit Risks

This year, Wall Street’s hype around AI has turned into panic, with investors worried that the technology might displace major software and tech companies. Bookstaber states that because private credit is closely linked to AI infrastructure and AI-affected software sectors, concerns about AI will only deepen investor confidence issues in private credit.

“Due to the lack of organized trading and limited information access, investor withdrawals could trigger a large-scale run, which in the past has transformed financial stress into full-blown crises,” he wrote.

3. AI Has Led to “Dangerous” Market Concentration

Major tech companies are investing billions in AI. Just Amazon, Alphabet, Microsoft, and Meta plan to spend about $600 billion on AI by 2026. These massive investments have fueled market enthusiasm for top firms. For example, Nvidia alone accounts for about 7% of the S&P 500 index weight.

Bookstaber states, “This level of concentration is unprecedented and dangerous because it means any shock to one company could ripple through the entire market, rather than being absorbed naturally.”

“He adds, “In this tightly interconnected system, weakness in private credit could pressure tech giants’ AI investments, threatening stock portfolios, retirement funds, and pensions for millions of people.””

4. Geopolitical Tensions Impact AI’s Physical Supply Chain

Power and chip shortages have become critical bottlenecks for AI development. The energy-intensive AI data centers have driven up demand for electricity and advanced chips, outstripping supply. Meanwhile, energy and chip supplies are entangled in geopolitical tensions; with ongoing conflicts like the US-Iran tensions, global supply chains are disrupted.

Bookstaber points out that these pressures have spread to private credit and stock markets.

“Our current financial system isn’t collapsing because of a single failure but because different shocks are propagating through the same system in unpredictable ways,” he wrote. “Once problems arise, their spread is far faster than we can control.”