A Columbia Economist Explains How The Iran War Could Hurt An Already-fragile Private Credit Market

• Columbia economics professor Brett House says the Iran war poses risks to private credit.
• The industry is already in a tenuous position amid a run of redemption requests.
• House says he's worried about slowing economic growth and tightening macro conditions.

The Iran war's immense impact on markets hasn't eased up in recent days. Tensions spiked anew on Thursday, pushing oil sharply higher and stocks lower.

But Brett House, an economics professor at Columbia, is focused on a different part of the market: private credit. He sees a convergence of conditions that could further compromise the already-fragile industry.

"I'm concerned about the possible imbalances, bubbles and weaknesses that may exist in private credit markets, which are opaque and do not price and mark to market on a regular basis to ensure easy monitoring of those imbalances," House told Business Insider.

He continued: "The combination of slower growth and more difficult financial conditions together make the prospects for private credit more difficult rather than easier."

While the Iran war has piqued House's concern, he's been concerned about private credit for months, following the bankruptcies of several high profile companies in the space.

Other high-profile pundits have been beating the same drum.

Famed economists Mohamed El-Erian and Paul Krugman have raised concerns about the Iran war overshadowing the risk of possible economic stress from private credit.

"For the entire economy, [these] conditions are generally negative for the prospects of firms and the extent that those firms are being financed in the private credit space," House said. "Just as firms and the rest of the economy are facing those more difficult circumstances, the path ahead in the immediate term is not easier for private credit as a result of Iran."