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 truce signed with Tehran to end the Gulf conflict, describing any new efforts to negotiate or deal with the Iranian leadership as 'mere nonsense and a waste of time,' while warning that Washington may initiate serious and open military options to respond to targeting commercial navigation.

This sudden dramatic shift, accompanied by Washington's threat to launch broad new military strikes, caused a violent logistical and financial shock to the joints of the global economy; oil prices immediately jumped by more than 7% 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 indicators and European and Asian markets turned red as investors fled en masse to safe havens, putting the renewed conflict in the Strait of Hormuz on the verge of a volcanic eruption for the entire global economy, at a time when the International Monetary Fund warned again that continued bleeding would force it to further trim global growth rates, which are modestly fixed at 3%.

Traders working on the New York Stock Exchange (AP)

Oil market ablaze

Trump's sharp statements reignited fears of a complete and prolonged blockage of the world's energy artery in the Strait of Hormuz, which traders immediately translated into panic buying that drove prices up wildly. Brent crude strengthened its gains, rising 7.4% to settle at $79.64 per barrel, while US light West Texas Intermediate crude followed with an increase of nearly 7.3% to reach $75.58 per barrel.

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

Adding to the sensitivity of oil fears were official data released this week, which revealed that US inventories in the Strategic Petroleum Reserve fell to their lowest level since 1983, depriving the global economy of any maneuvering room to absorb the inevitable upcoming shocks in the event of a full naval blockade.

Selling wave sweeps stocks

Global stock exchanges received the US military threats of night-time land and sea strikes against Iran with immediate trembling, triggering a broad sell-off of high-risk assets. New York opened trading with a sharp decline; the Dow Jones Industrial Average lost about 1% of its value (equivalent to 514 points), followed by the broader S&P 500 index by 0.46%, and the Nasdaq for technology stocks by 0.31%.

In Europe, markets in Paris and Frankfurt fell sharply by 1.8%, while London dropped by 1.2%. In Asia, the KOSPI index in Seoul led the declines, recording a violent drop of more than 5%.

Airlines and cruise companies were the direct victims of the sudden spike in fuel prices; United Airlines shares fell by 3.2% and Delta by 1.9%. Shares of cruise operators like Carnival also tumbled by 3% due to fears of evaporating profit margins and rising operating costs.

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

Dealers speak 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 tone of war reordered traders' priorities towards 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 around 101.1 points, supported by expectations of keeping interest rates higher for longer to curb potential oil inflation.

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

Experts and strategic analysts agreed that international markets are now completely governed by sharp and violent fluctuations due to 'geopolitical blindness' resulting from the continuous tactical shifts in the current US administration's positions. Analysts at financial groups believe the greatest fear lies not in the current momentary decline in stock prices, but in the possibility that the cancellation of the truce could turn into a complete diplomatic rupture leading to the return of an open and comprehensive 'tanker war' that forces international powers to impose a mutual naval blockade.