3 Global Crisis In The Brew: Ajay Bagga’s Predictions On What’s Coming As Middle East War Rages On

The global financial system is facing three simultaneous and poorly understood crises - private credit fragility, an unprecedented energy disruption, and stressed bond markets. We don't understand the scale or interaction of these. It could be ‘2007 leading to a full blown 2008’ along with a Dot Com Crash 2.0 thrown in for good measure.

1. The first major fault line lies in massive private credit exposure. Retail investors are increasingly in the dock as multiple funds suspend redemptions simultaneously. These funds are structurally fragile due to illiquidity, opacity, and heavy leverage, having borrowed over $300 billion from commercial banks to amplify returns. When trades reverse, losses can rapidly wipe out capital.
2. The second crisis is unfolding in energy markets. The world is witnessing what is described as the largest energy disruption in human history, with no clear off-ramp. The risk is a vicious, self-reinforcing downward spiral that could drag the global economy into deeper distress.
3. The third pressure point is in bond markets, which are attempting to price in these shocks in real time. This comes amid record debt levels, high fiscal deficits, and surging inflation. Central bank interest rate tools appear increasingly ineffective in a scenario defined by rising inflation and falling economic output.

Notably, there is no equivalent of a Paul Volcker figure in 2026 to decisively tackle inflationary pressures.

Compounding these stresses is massive AI capital expenditure, which has already strained financial markets. These investments are built on high valuations driven by ‘this time is different’ narratives, adding another layer of vulnerability.

At the same time, distressed debt investors are calling this the biggest opportunity since 2008. 

The broader picture resembles a convergence of past crises: the Asian Financial Crisis of 1997, the Dot Com bust, the 1973 OPEC shock, and the 2008 Global Financial Crisis.

The signals are sobering. Early warning indicators suggest that the global financial architecture and its underlying plumbing are under significant strain.

Even with a rapid truce and a push toward normalisation, private credit and AI-related risks will remain key challenges through 2026. In the event of a prolonged Iran conflict, however, the outlook becomes far more uncertain - at that point, all bets are off.

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