But the potential danger that markets may be underestimating is that sharp falls and heightened volatility in currency, commodity, equity, and bond markets could expose latent financial and economic vulnerabilities in the global economy.
US President Donald Trump may claim that the war will end “very soon”, but the situation in the Middle East is escalating rapidly. Iran’s retaliation is pulling more countries into the conflict, while Israel has broadened its offensive to include Lebanon and intensified its attacks on Iran. With trust shattered and no clear way to de-escalate, the chance of a quick resolution is slim.
The risks to global and Asian economies go beyond the damage of high oil prices. The war also brings even greater uncertainty for businesses, which will, in turn, slow economic activity.
