The global economy has entered a new and complex phase of geopolitical and financial uncertainty, after US President Donald Trump detonated a heavy political bomb 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 waste of time,' while warning that Washington may begin serious and open military options to respond to the targeting of commercial navigation.

This sudden dramatic shift, accompanied by Washington's threat to launch new wide-ranging 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 break the $79 per barrel barrier, 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 exodus of investors towards safe havens, placing the renewed conflict in the Strait of Hormuz on the brink of a volcano, as the IMF warned again that continued bleeding would force it to further trim global growth rates, which are timidly fixed at 3%.

Traders working on the New York Stock Exchange (AP)

Oil market on fire

Trump's sharp statements 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 raised prices wildly. Brent crude strengthened to rise by 7.4% to settle at $79.64 per barrel, while US light West Texas Intermediate followed with a rise of nearly 7.3% to reach $75.58 per barrel.

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

Adding to the sensitivity of oil concerns are official data released this week, which revealed that US crude oil inventories in the Strategic Petroleum Reserve fell to their lowest levels since 1983, depriving the global economy of any room for maneuver to absorb the inevitable upcoming shocks in the event of a complete naval blockade.

Selling wave engulfs stocks

Global stock exchanges reacted to the US military threats of night-time land and sea strikes against Iran with immediate jitters, triggering a broad sell-off of high-risk assets. New York opened its trading session 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 at 0.46%, and the tech-heavy Nasdaq at 0.31%.

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

Airlines and cruise operators were the direct victims of the sudden flare-up in fuel prices; United Airlines shares fell 3.2% and Delta by 1.9%. Shares of cruise operators such as Carnival also plunged by 3% due to fears of evaporating profit margins and rising operating costs.

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

Dealers talk near screens displaying foreign exchange rates in 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 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-driven inflation.

In contrast, the Japanese currency continued its wobble; the yen hovered around 162.49 yen per dollar, affected by the vast gap in bond yields between Washington and Tokyo, approaching its lowest 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 opacity,' resulting from the continuous tactical shifts in the current US administration's positions. Analysts at financial groups believe that the greatest fear is not in the current momentary retreat of stock prices, but in the possibility that the cancellation of the truce could turn into a complete diplomatic rupture leading to an open and comprehensive 'oil tanker war' that forces international powers to impose a mutual naval blockade.