The global economy 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 declaration of ending the war and canceling the memorandum of understanding and temporary truce signed with Tehran to end the Gulf conflict, describing any new attempts to negotiate or deal with the Iranian leadership as 'mere folly and a waste of time,' while also warning that Washington might initiate serious and open military options in response to attacks on 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 global economy's core; oil prices immediately surged more than 7%, breaking through the $79 per barrel barrier, threatening to freeze two years of anti-inflation gains and undermining hopes for monetary policy easing.

In contrast, Wall Street, European, and Asian indices turned red as investors fled en masse to safe havens, placing the renewed conflict in the Strait of Hormuz on the brink of a volcano for the entire global economy, as the International Monetary Fund once again warned that continued bleeding would force it to further erode global growth rates, which remain modestly at 3%.

Traders working at the New York Stock Exchange (AP)

Oil market on fire

Trump's sharp remarks reignited 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 wildly higher. Brent crude strengthened its gains, rising 7.4% to settle at $79.64 per barrel, while US West Texas Intermediate crude followed with a gain of nearly 7.3% to reach $75.58 per barrel.

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

Adding to the sensitivity of oil concerns were official data released this week, which revealed that US crude inventories in the Strategic Petroleum Reserve fell 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.

Wave of selling sweeps stocks

Global stock markets reacted to US military threats of land and sea strikes against Iran with an immediate shudder, triggering a broad sell-off of high-risk assets. New York opened sharply lower, with the Dow Jones Industrial Average losing about 1% (equivalent to 514 points), followed by the broader S&P 500 index dropping 0.46% and the tech-heavy Nasdaq falling 0.31%.

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

Airlines and cruise companies were the direct victims of the sudden surge in fuel prices; United Airlines shares fell 3.2% and Delta shares dropped 1.9%. Cruise operator stocks such as Carnival also plunged 3% on concerns about evaporating profit margins and rising operating costs.

The energy crisis coincided with growing investor skepticism over the high valuations of the semiconductor and AI sectors; Samsung Electronics shares continued their decline for a second consecutive day, falling 6% in Seoul, despite reporting a massive 19-fold profit surge, amid real concerns over slowing demand for memory chips in the second half of the year. In contrast, US-based Broadcom shares rose 3%, supported by a massive $30 billion supply deal with Apple, partially offsetting the Nasdaq's tech losses.

Traders talk near screens displaying foreign exchange rates at a trading room of Hana Bank in Seoul (AP)

Yen wobbles, dollar seeks safety

Foreign exchange markets were not immune to this shock; the war rhetoric rearranged traders' priorities toward holding the US currency as a safe haven during crises.

The US dollar index held relatively stable 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 its wobble; the yen hovered around 162.49 per dollar, affected by the wide gap in bond yields between Washington and Tokyo, and 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 dominated by sharp and violent volatility due to 'geopolitical opacity' resulting from the continuous tactical shifts in the current US administration's positions. Financial group analysts believe that the biggest fear lies not in the current temporary decline in stock prices, but in the possibility of the cancellation of the truce turning into a complete diplomatic rupture, leading to a return of an open and comprehensive 'oil tanker war' that would force international powers to impose mutual naval blockades.