US consumers will feel the pinch from the Iran war even if stocks and the dollar don't, a finance guru says

• US stocks and the greenback are shrugging off the Iran conflict, but American consumers face pain.
• Finance professor Derek Horstmeyer flagged the risk of persistent inflation in a recent interview.
• AI companies might carve out niches, and bears should be careful betting against the boom, he said.

American consumers will feel the pinch from the Iran conflict even if stocks and the dollar don't, one market guru says.

Derek Horstmeyer, a finance professor at George Mason University's Costello College of Business, says it's striking how the S&P 500 and the greenback have responded to a major military engagement.

It's "hard to believe that you could start a war" that sparks the closure of the Strait of Hormuz — shutting off 20% of the global oil supply and spiking crude prices to over $100 a barrel — and have the S&P 500 down just 2% over the past month, Horstmeyer told Business Insider by phone this week.

The benchmark index is a "lot more insulated" from oil-price shocks today than 50 years ago, he said. That's because the tech giants that dominate the market-weighted index are much less reliant on crude than General Electric, Exxon Mobil, and other market heavyweights of the past.

Consumers aren't so lucky; Horstmeyer said, "There is no way this is good" for them. Even if the war ends soon, it will take weeks for the oil supply chain to recover, he said. The upshot is gasoline prices are likely to remain around $3 to $4 a gallon for the next month at least, he added.

While stocks might suffer a 10% or 20% correction, he said, consumers are "going to feel this in their pockets" as higher energy prices drive up inflation.

Horstmeyer underlined how remarkable it is that the "US can cause this havoc around the world and then be the beneficiary from everyone flying to the dollar."

"We see this over and over again," he continued, crediting the dollar's status as the world's reserve currency and a lack of serious contenders.

He predicted the US dollar index would continue hovering around 100 points until the conflict concludes, and gold would likely stay above $5,000 per ounce, thanks to its appeal as a haven asset.

The AI race is evolving

Horstmeyer told Business Insider in September that the AI race could play out similarly to the streaming wars — only a few of the companies spending big end up with significant market shares, while most of the others give up or get acquired.

Anthropic's recent progress has led him to reconsider that view: he now sees the potential for several AI companies to carve out their own specialties and niches, rather than large language models (LLMs) becoming a commodity.

"It's amazing to see what Claude has done," Horstmeyer said. Anthropic's flagship AI model has gone from trailing the pack to being "leaps and bounds" above some rivals.

He nodded to how Anthropic's release of AI software tools recently caused a sharp sell-off of software stocks, as traders worried customers would cancel their subscriptions and use AI-powered alternatives instead.

More broadly, Horstmeyer likened the AI infrastructure buildout to the fiber-optic and railroad booms of the past. Even if the tech titans overestimate demand and overinvest in microchips and data centers, the processing capacity they create could be a "great resource" for people in the future, he said.

Both investor Michael Burry of "The Big Short" and bubble historian Jeremy Grantham have warned that the tech revolutions of the past were preceded by speculative bubbles that burst.

Horstmeyer agreed, saying that virtually none of the pioneering businesses in the first dot-com bubble are around today. Amazon was one of the few long-term winners, but its shares crashed more than 90% peak to trough after the bubble burst.

Horstmeyer said he was "skeptical" about AI, and a "little bit pessimistic" by nature, unlike a permabull such as Tom Lee.

"I wish I had that attitude," he said, because it "pays off in the long run."

Horstmeyer cautioned against shorting the market, as even if it's a bubble, nobody knows when it'll pop. He plans to "just go along for the ride" and prune his portfolio when trouble rears its head, he added.