The global economy has entered a new and complex phase of geopolitical and financial uncertainty, after US President Donald Trump dropped a heavy political bombshell from the Turkish capital Ankara during his participation in the NATO summit. This came with his official and final announcement of ending the war and canceling the memorandum of understanding and temporary de-escalation signed with Tehran to end the Gulf conflict, describing any new efforts to negotiate or deal with the Iranian leadership as 'mere folly and waste of time,' while warning that Washington may initiate serious and open military options to respond to the targeting of commercial navigation.

This sudden dramatic shift, accompanied by Washington's threat to launch wide new military strikes, sent a violent logistical and financial shock through the global economy's fabric; oil prices immediately jumped more than 7 percent to breach the $79 per barrel mark, threatening to freeze two years of gains in fighting inflation and undermining hopes for monetary policy easing.

In contrast, Wall Street indices and European and Asian markets turned red with a mass investor flight to safe havens, placing the renewed Strait of Hormuz conflict and the entire global economy on the edge of a volcano, as the IMF warned again that continued bleeding would force it to further trim global growth rates that have been timidly steady at 3 percent.

Traders working at the New York Stock Exchange (AP)

Oil market on fire

Trump's sharp remarks rekindled fears of a complete and prolonged blockage of the global energy artery in the Strait of Hormuz, which traders immediately translated into panic buying that drove prices up wildly. Brent crude reinforced its gains, rising 7.4 percent to settle at $79.64 per barrel, while US West Texas Intermediate followed with a near 7.3 percent increase to reach $75.58 per barrel.

Although these levels remain below the peak of $120 recorded at the start of the conflict, their rapid jump of between 25 percent and 32 percent compared to pre-war levels has reinjected inflation risks into bond markets.

Adding to the sensitivity of oil fears were official data released this week, revealing that US Strategic Petroleum Reserve stocks have fallen to their lowest since 1983, depriving the global economy of any maneuvering room to absorb the inevitable shocks ahead if a full naval blockade is imposed.

Sell-off wave sweeps stocks

Global stock markets reacted to the US military threats of nighttime ground and naval strikes against Iran with immediate jitters, triggering a broad sell-off of high-risk assets. New York opened sharply lower, with the Dow Jones Industrial Average losing nearly 1 percent (equivalent to 514 points), followed by the broader S&P 500 index at 0.46 percent, and the tech-heavy Nasdaq at 0.31 percent.

In Europe, Paris and Frankfurt markets fell sharply by 1.8 percent, while London dropped 1.2 percent. In Asia, Seoul's KOSPI index led declines with a violent drop exceeding 5 percent.

Airlines and cruise companies were the direct victims of the sudden surge in fuel prices; shares of United Airlines fell 3.2 percent and Delta 1.9 percent. Cruise operators such as Carnival also saw their shares drop 3 percent amid fears of evaporating profit margins and rising operational costs.

The energy crisis coincided with increased investor skepticism about the high valuations of the semiconductor and artificial intelligence sectors; Samsung Electronics shares continued their decline for a second consecutive day, dropping 6 percent in Seoul, despite announcing a huge 19-fold profit jump, amid real fears of slowing demand for memory chips in the second half of the year. In contrast, US-based Broadcom shares gained 3 percent, supported by a massive $30 billion supply deal with Apple, partially offsetting the tech-heavy Nasdaq's losses.

Dealers talking near screens displaying foreign exchange rates in a trading room of Hana Bank in Seoul (AP)

Yen staggers, dollar seeks safety

Foreign exchange markets were not immune to this shock; the war rhetoric reshuffled traders' priorities toward holding the US currency as a safe haven in times of crisis.

The US dollar index maintained relative stability against a basket of major currencies, moving at 101.1 points, supported by expectations of keeping interest rates higher for longer to curb potential oil-driven inflation.

In contrast, the Japanese currency continued to stagger; the yen hovered around 162.49 yen per dollar, affected by the wide yield gap between Washington and Tokyo, and approaching its lowest levels in about 40 years, putting additional pressure on the Bank of Japan to intervene in the markets.

Experts and strategists agreed that international markets are now entirely dominated by sharp and violent fluctuations due to 'geopolitical blindness' resulting from continuous tactical shifts in the current US administration's positions. Financial group analysts believe the biggest fear lies not in the current temporary decline in stock prices, but in the possibility that the cancellation of the de-escalation could turn into a complete diplomatic rupture leading to a full-scale 'oil tanker war' that would force international powers to impose mutual naval blockades.