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 announcement ending the war and canceling the memorandum of understanding and the 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 a waste of time,' while warning that Washington might 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 wide and 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 percent to break through 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 investor flight to safe havens, placing the renewed conflict in the Strait of Hormuz on the brink of a volcano for the entire global economy, at a time when the International Monetary Fund again warned that continued bleeding would force it to cut further into global growth rates, which are modestly steady at 3 percent.

Traders working at the New York Stock Exchange (AP)

Oil Market Heats Up

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 raised prices wildly. Brent crude strengthened its gains to rise by 7.4 percent, settling at $79.64 per barrel, while US light West Texas Intermediate crude followed with an increase of nearly 7.3 percent 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 re-injected inflation risks into bond markets.

Adding to the sensitivity of oil concerns were official data released this week, which revealed that US Strategic Petroleum Reserve inventories 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 full naval blockade.

Wave of Selling Sweeps Stocks

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

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

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

The energy crisis coincided with increased 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 percent in Seoul, despite announcing a huge 19-fold jump in profits, amid real fears of slowing demand for memory chips in the second half of the year. In contrast, US shares of Broadcom managed to rise by 3 percent, supported by a massive $30 billion supply deal with Apple, which partially mitigated the losses of the tech-heavy Nasdaq.

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

Yen Wobbles, Dollar Seeks Safety

The foreign exchange markets were not immune to this shock; the warlike tone reordered traders' priorities toward holding the US currency as a safe haven in times of crisis.

The US dollar index maintained its relative stability against a basket of major currencies, moving at 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 wobble; the yen hovered around 162.49 yen per dollar, affected by the wide 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 have become completely dominated by sharp and violent fluctuations due to 'geopolitical opacity' resulting from the continuous tactical shifts in the current US administration's positions. Financial group analysts see the greatest fear not in the current momentary decline in stock prices, but in the possibility of the cancellation of de-escalation turning 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.