World financial markets are recording their deepest declines in months on the fourth day of full-scale conflict with Iran. The escalation of military actions in the Middle East has led to a spike in oil and gas prices, reigniting fears of a return to high inflation. Investors are massively fleeing to safe havens such as the US dollar, selling off stocks in Europe, Asia, and emerging markets.
Sharp spike in oil prices
The conflict with Iran has led to a sudden increase in energy commodity prices, heightening concerns about inflation and supply stability.
Flight to the dollar
The American currency is recording its strongest growth in a year, while stocks and emerging market currencies are being sold off en masse.
Paralysis of air transport
Thousands of canceled flights and rising fuel prices are hitting the aviation industry and global supply chains.
Diplomatic tensions
The attack on the US embassy in Saudi Arabia and the evacuation of citizens indicate the crisis is spreading beyond Iran's borders.
The fourth day of war with Iran brought a sharp collapse in sentiment on global financial floors. European indices suffered the most, recording their worst session since trade tensions two years ago. The British stock market recorded its largest decline in nearly a year, which analysts directly link to concerns about the stability of energy supplies through the Hormuz Strait. Anxiety was deepened by an attack on the US embassy in Saudi Arabia and the call for American citizens to immediately leave that kingdom. In Asia, the Japanese Nikkei 225 index lost over 1500 points during the morning session, reacting to the paralysis of international air traffic and rising aviation fuel costs. Airlines are massively canceling flights, leading to drastic declines in valuations of companies in the transport and tourism sectors. Meanwhile, on the currency market, the US dollar is strengthening at the fastest pace in a year, becoming the main beneficiary of the flight to safety strategy. Emerging market currencies are losing value, putting the central banks of these countries in a difficult situation. The Middle East remains a key region for the stability of the global economy since the oil crises of the 1970s, when the OAPEC embargo led to stagflation in Western countries.The bond market situation is characterized by extreme volatility. Rising treasury yields suggest that investors are abandoning bets on rapid interest rate cuts by the Fed. Instead, fear of persistent inflation caused by a supply shock in the commodity market dominates. Although JPMorgan analysts suggest that the sell-off of European banks may be exaggerated, most financial institutions warn of the long-term effects of disruptions in supply chains. In the shadow of the armed conflict, however, a glimmer of diplomatic hope appears – US and Chinese trade representatives plan a meeting in mid-March, which could stabilize relations between the powers ahead of a planned summit of leaders of both countries. 1 500 pkt — lost by the Japanese Nikkei index during one session Experts point to the weakness of traditional 60/40 investment portfolios in conditions of total war, as simultaneous selling of stocks and bonds deprives investors of protection. Meanwhile, markets in the United Arab Emirates plan to resume trading on March 4 after a break forced by the crisis. The situation remains dynamic, and a key factor for stabilization will be a possible de-escalation in the Persian Gulf region.