Turmoil in Global Markets Amid Rising Concerns of 'Trade War' and Military Conflict

Increasing concerns about a potential 'trade war' or military conflict between the United States and North Korea or Iran have impacted stock, bond, and oil markets. Reports indicate that the appointment of John Bolton as National Security Advisor to President Donald Trump has heightened speculation about military conflict with Iran or North Korea. The possibility of military confrontation with Iran and its implications for the country's oil exports led to a significant increase in oil prices on the third of Farvardin (March 22). The Financial Times, citing Olivier Jacob, an oil analyst at Petromatrix, states, "It is almost impossible to see an article with his (John Bolton's) name that does not use the words 'war' or 'bomb,' and these words are usually accompanied by 'Iran.'" Jacob notes that Mr. Bolton, alongside Mike Pompeo, whom Mr. Trump has nominated for Secretary of State, means for most markets that at least the JCPOA (Joint Comprehensive Plan of Action) is over. On March 13, Donald Trump dismissed his Secretary of State Rex Tillerson after months of speculation and appointed Mike Pompeo, the head of the CIA, as his successor. Pompeo is known to be a staunch opponent of the nuclear deal with Iran. Another recent change is the appointment of John Bolton in place of General McMaster as the President's National Security Advisor, a position that plays a decisive role in U.S. leadership policies. John Bolton is a fierce critic of the Iranian government and has previously called for U.S. support for actions aimed at 'regime change' in Iran. Michael Herson, an economic analyst, told Agence France-Presse that Mr. Bolton's appointment, as an opponent of the nuclear deal with Iran, has raised concerns about the continuation and status of Iran's oil exports. The significant increase in Iran's oil exports was made possible following the nuclear deal and the Joint Comprehensive Plan of Action. Reports indicate that the value of the dollar has also decreased due to rising concerns about military conflict with North Korea if negotiations with Pyongyang fail, or conflict with Iran. Simultaneously, the increasing likelihood of a 'trade war' between the two largest economies in the world, the U.S. and China, has also affected global markets. Last Thursday, the U.S. President signed an order that could impose over $50 billion in tariffs on Chinese goods. Trump stated that these tariffs could include more than $60 billion worth of goods. The presidential order emphasizes that Chinese goods will be targeted by new tariffs after a consultation period with Chinese officials. Following this announcement, officials from the People's Republic of China expressed hope for a change in the U.S. approach but added that Beijing 'has no fear of a trade war.' Two weeks ago, Donald Trump also imposed new tariffs on steel and aluminum imports, which Chinese trade officials described as an 'unjustifiable attack' on the multilateral global trading system. In addition to China, the European Union has stated that economic threats against its members will not push the union towards negotiations with Washington. Cecilia Malmström, the EU Trade Commissioner, stated that the union is always willing to negotiate with its American counterparts, 'but we are not willing to negotiate under pressure and threat.' On the other hand, Mr. Trump says that his strict economic policies are aimed at pushing trading partners to negotiate in ways that are more beneficial for his country. The U.S. President has consistently emphasized that by supporting domestic production more, he intends to revive American industries and prevent other countries from 'taking unfair advantage' of the U.S. In the last day of the past week, U.S. markets fell by about two percent, the DAX in Germany dropped by 1.8 percent, and the CAC 40 in France fell by 1.4 percent. The decline in market values was not limited to the West, as the situation in the stock markets of Japan, South Korea, Hong Kong, and China was similar.