Global markets brace for economic fallout from Iran conflict

President Donald Trump is rejecting any diplomatic settlement, the world’s energy markets are in disarray, and shipping lanes that transport one-fifth of the world’s gas and oil have essentially closed after just one week of the U.S.-Israeli military assault against Iran.

Trump made his position clear Friday in a social media post, saying there would be no deal with Iran short of “unconditional surrender.”

He added that after Iran capitulates and new leadership is chosen, the United States and its allies would “work tirelessly” to rebuild the country’s economy and bring it back “from the brink of destruction.”

A day earlier, Trump told Reuters he wants a hand in picking who leads Iran next.

“IRAN WILL HAVE A GREAT FUTURE. MAKE IRAN GREAT AGAIN (MIGA!)” was his final statement, which has come to represent his foreign policy stance.

Iran, on the other hand, is unyielding.

Foreign Minister Abbas Araghchi stated on Thursday that Tehran is “not asking for a ceasefire” and sees “no reason” to begin negotiations.

In an interview with Tom Llamas on NBC Nightly News, Araghchi said that Iran is “confident” it can confront an American ground invasion and cautioned that it “would be a big disaster for them.”

Additionally, he refuted assertions of early American triumph, stating that it is “clear that the U.S. has failed to achieve its main goal, which was clean, rapid victory.”

Trump has said he expects the war to last four to five weeks. Araghchi’s comments suggest Tehran is prepared for it to go longer.

Energy markets reel as US-Iran war continues

The fighting has heavily disrupted the global energy markets.

Qatar’s energy minister, Saad al-Kaabi, warned Friday that rising oil prices triggered by the conflict “could bring down the economies of the world.”

His caution followed QatarEnergy’s declaration of force majeure, releasing the company from contractual obligations in the event of unforeseen circumstances, regarding supplies of liquefied natural gas.

The state-owned corporation was forced to stop producing LNG and related products due to a drone attack on Qatar’s energy infrastructure.

“QatarEnergy has declared Force Majeure to its affected buyers,” the company said in a statement, adding that it remains in contact with customers and partners as it works through the situation.

Oil markets responded immediately. Brent crude, the global benchmark, broke $90 per barrel following Trump’s post and was trading up 4.5% at $89.25 by Friday morning, a new 52-week high.

In the United States, West Texas Intermediate was up 6.2% at $84.53 during early trading.

Analysts say Europe is particularly vulnerable. Joachim Klement, head of strategy at Panmure Liberum, told CNBC’s “Europe Early Edition” that the continent is particularly exposed.

Europe now depends heavily on Qatar for natural gas imports, and with QatarEnergy suspending shipments, supplies are tightening at the worst possible moment.

“We are now facing the very risky situation where our natural gas storage is close to empty because of a cold winter, and being at the end of the winter time, and supplies from Qatar are being reduced,” Klement said.

He pointed to Europe’s auto, chemicals, and industrial sectors as the most at risk.

Strait of Hormuz closes as shipping grinds to a halt

Compounding the energy crunch is the closure of the Strait of Hormuz.

The narrow waterway, through which roughly one-fifth of the world’s oil and gas passes, is now closed to all shipping as Iran’s threat of strikes continues.

Maersk, a Danish shipping operator, said on Friday that it is temporarily stopping two services that link the Middle East to Asia and Europe.

147 container ships are presently taking refuge in the Persian Gulf because they are unable to move, according to freight analytics company Xeneta. Global supply chains are experiencing port congestion, delays, and increased freight costs as a result of the backlog.

With Iran refusing to back down, Trump rejecting any agreement, and attacks on energy infrastructure, there is no indication that the confrontation will end, and the economic consequences are just getting started.

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