Suddenly global markets are reeling – waking up to the reality of the unwinnable Iran War. What will a dramatic shift in sentiment mean for stocks, bonds and commodities as stagflation beckons, and Trump finds himself isolated? There is a growing risk of a liquidity shock to global markets.

The War in Iran is a kinetic feature of the economic/hegemonic struggle between the USA and China. President Trump will lose because his Iran war is unwinnable. Iran won’t lose because it does doesn’t have to win. That’s a recipe for a forever war, and a definition of asymmetric warfare. The likely winner of a wider Economic War will be China. Energy and Supply Chains will determine the future.

Pretty much as was expected Donald Trump has declared his war almost over. Its not. It has destabilised the global economy. What might be roiled in its wake? One area to watch is how a liquidity default-storm in Private Credit could infect global bond and equity markets, causing a global market crisis.

Global disruption – how likely is it to end quickly? Trump’s objective was to install a regime that will do his bidding in Iran. The appointment of Khamenei v2.0, the lack of a clear opposition, or defectors, makes a swift closure increasingly less likely. Global markets are pricing for a long, destabilising war with rising inflationary and geopolitical volatility.

Sometimes you have to laugh. Tariffs have been the cornerstone of Trump’s economic miracle, allowing him to deflect, discombobulate and distract voters from economic truths. Now the NY Fed says tariffs are a consumption tax – even MAGA voters will be worried as the Mid-Terms approach.

The future will be set not just by the defence and deterrence discussions last weekend in Munich, but by how global markets react to competition. New Chinese AI drops from DeepSeek and Qwen may challenge US hyperscalers and challenge expectations of global demand and markets.  

Yesterday was a strategic disaster for America. Trump and his minions have destroyed the alliances that underpinned American exceptionalism. He revealed himself as weak and venal; an old man lost in rambling hatreds. America now faces a scrabble to save face and recover a modicum of respect. The medium-to-long term market implications are huge.

Rising risks, geopolitical positioning, conflict, and strategic compression will be the themes for coming decade. Who will rise, who will fall? What are the implications for markets. Do not expect easy answers. This is unlikely to play out as anyone predicts.

The frenetic pace of activity in Washington this week has left the commentariat stunned while dulling the market’s sensitivity to momentous events. Some of it is madness, while much of what Trump is doing makes curiously perverse sense – but what are the risks it all spectacularly unravels?

Markets have opened strongly in 2026 and seem remarkably sanguine towards rising geopolitical instability and shocks. They’re buying a rosy outlook of rising profits, lower rates and costs, and are blithely unconcerned by the risks of destabilisation from conflict or competition.