Before the US and Iran reached a brief memorandum of understanding, the US eased sanctions on Iranian oil exports and eased tensions over navigation in the Strait of Hormuz.

But just now, Trump commented, “the agreement is over,” on top of the US rescinding waivers for Iranian oil sales and US military strikes on Iranian targets—Middle East geopolitical risk has completely returned to high tension.

In the short term, gold, crude oil, and US dollar-denominated US Treasuries will all rise on sentiment, while the stock market will weaken, and capital will flow toward them to seek safety.

If things really go that way—

A sustained surge in oil prices would weigh on global consumption, the US and European economies would weaken rapidly, and they would enter a recession ahead of schedule.

Global supply chain costs would rise across the board, major commodities would generally jump higher, triggering a new round of global price increases.

Then the market would reprice “stagflation” expectations of high inflation and low growth, with capital shifting from growth sectors to energy, gold, and defensive consumption.