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 to end the war and cancel 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 warning that Washington might initiate serious and open military options in response to attacks on commercial shipping.

This sudden dramatic shift, accompanied by Washington's threat to launch broad new military strikes, caused a violent logistical and financial shock to the foundations of the global economy; oil prices immediately jumped by 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 as investors fled en masse to safe havens, putting the renewed conflict in the Strait of Hormuz on the brink of a volcano. Meanwhile, the International Monetary Fund warned again that continued bleeding would force it to further trim global growth rates, which are stubbornly fixed at a modest 3 percent.

Traders work on the floor of the New York Stock Exchange (AP)

Oil Market on Fire

Trump's sharp remarks rekindled 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 sky-high. Brent crude strengthened, rising 7.4 percent to settle at $79.64 a barrel, while US West Texas Intermediate crude followed closely with an increase of nearly 7.3 percent to reach $75.58 a 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 re-injected inflation risks into bond markets.

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

Selling Wave Sweeps Stocks

Global stock exchanges reacted to US military threats of night-time ground and naval strikes against Iran with immediate tremors, triggering a broad sell-off of high-risk assets. New York opened sharply lower, with the Dow Jones Industrial Average losing about 1 percent of its value (equivalent to 514 points), followed by the broader S&P 500 index down 0.46 percent, and the tech-heavy Nasdaq down 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 the declines with a violent drop exceeding 5 percent.

Airlines and cruise operators were the direct victims of the sudden surge in fuel prices; United Airlines shares fell 3.2 percent and Delta fell 1.9 percent. Shares of cruise operators such as Carnival also tumbled 3 percent on fears of evaporating profit margins and rising operating costs.

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

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

Yen Staggers, Dollar Seeks Safety

Foreign exchange markets were not immune to this shock; the war rhetoric reordered 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 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 to stagger; the yen hovered around 162.49 yen per dollar, affected by the wide gap in bond yields between Washington and Tokyo, and approaching its lowest levels in about 40 years, putting additional pressure on the Bank of Japan to intervene in markets.

Experts and strategic analysts agreed that international markets are now completely dominated by sharp and violent volatility due to 'geopolitical opacity' resulting from constant tactical shifts in the current US administration's positions. Financial group analysts believe that 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 a return of an open and comprehensive 'tanker war' that would force international powers to impose a mutual naval blockade.