Finance01 April, 20261 min read
Iran War Sends Global Markets Into Worst Crisis Since 2008
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Markets worldwide faced turmoil, higher trading costs, and risk-off sentiment. European government bonds faced a "perfect storm" amid Iran war.
Market Turmoil
The war in Iran triggered a global financial crisis of intensity not seen since 2008. Trading became more difficult and costly worldwide as market makers pulled back. The bid-ask spread on the U.S. two-year Treasury widened by about 27% in March.
Short-dated UK Gilts suffered their worst month in nearly three years, rising about 90 basis points. Global stocks lost about $14 trillion in value.
Brent crude surged from $80 to $110 per barrel at its peak. The IMF warned the economic fallout could reach $2.8 trillion globally.
Energy Shock
The oil price shock reverberated through global supply chains and consumer markets. Brent crude surged from $80 to over $110 per barrel by mid-March. Chinese carriers increased fuel surcharges.
The closure of the Strait of Hormuz forced oil-importing nations to deploy naval assets. Turkey began negotiations to secure alternative supplies from Azerbaijan. Airline industries faced a projected $20 billion in costs.
Fiscal Strains
Iran threatened to block exports as exports faltered. Iran's trade balance swung to a $1.6 billion deficit in March.
Pressure mounted on state finances as oil revenue plunged and military spending soared. Turkey's stimulus package failed to stabilize the currency.