Nearly five years ago, I warned that stagflation was only a broken supply chain away. A temporary outbreak did indeed occur in the immediate aftermath of the Covid-19 shock, as a surge in inflation coincided with an anemic recovery in global demand. But that economic disruption subsided quickly. Today, a more worrisome form of stagflation is in the offing, threatening severe and lasting consequences for the global economy and world financial markets.

An important difference between these two strains of stagflation is the nature of the damage. During the pandemic, supply chains were stressed by significant d...