Trump’s ‘shock and war’ makes this economic crisis different

The economic epicentre of this conflict has been energy. The effective closure of the Strait of Hormuz has deprived the world of a fifth of its oil supply, approaching 20 million barrels a day. This makes it the largest-ever shock to the global oil market and has caused wild intraday swings in oil prices and large-scale releases of strategic oil reserves, neither of which has historical precedent.

Seeking ways to understand the implications of the current conflict, analysts have been trawling past oil and geopolitical crises for inspiration and scenario planning. But perhaps there is a more recent example that offers both lessons and, on the face of it, some degree of reassurance about how economies and financial markets might respond.

Almost a year ago, the world experienced another day of shock and awe when punitive “liberation day” tariffs were announced by the US. Then, as now, the source was the President of the United States. The immediate effects also bore striking similarities: Asset prices fell sharply, gold prices rallied, risk appetite collapsed, growth forecasts were sliced and probabilities of US recession ballooned.

Yet what happened next was equally surprising. By the end of 2025, global equity prices were almost a fifth higher than at their start. Full-year growth forecasts were surpassing start-of-year expectations.

Contrary to recessionary predictions, the US was booming. Acute financial and economic precarity had, by the year end, given way to economic resilience and financial frothiness in tech stocks, private credit and leveraged loans.

The short explanation for this extraordinary reversal was that a mounting tech wave swamped a retreating tariff wave, carrying with it risk appetite and growth. Which begs the question – might history repeat itself? Is 2026 simply an oilier version of 2025? Might we once again be surprised by the world’s economic resilience and the financial market’s frothiness?

No. Today’s shock and war will leave deeper and more lasting scars than 2025’s shock and awe. In 2025, inflation pressures were abating and central banks globally were able to ease interest rates to cushion the impact of tariffs on global demand. With energy prices resurgent, that option has been lost: Markets are pricing rate rises in the euro area and Britain and no immediate easing in the US.

Indeed, financial markets are fearful that inflationary pressures might persist beyond the conflict. Alongside rising fiscal pressures, including from increased defence spending, this has meant longer-maturity global bond yields have also risen, again unlike in 2025. Tighter monetary conditions along the entire yield curve will further squeeze global demand.

And this tightening is not confined to “safe” rates. The past few weeks have seen a retreat from risk, particularly among bubblier assets (artificial intelligence and crypto stocks) and frothier markets (private credit and leveraged loans), exposing cracks in underwriting standards and valuations. In these markets, the age of innocence has decisively ended.

As it has across the Gulf states. Having served as a magnet for talent and capital, in part drawn by the promise of security, their safe-haven status has been shattered. This is chilling one of the world’s few growth hot spots just as the economic temperature is plummeting in other Gulf-dependent global growth areas such as India, South Korea and China.

Meanwhile in the West, trouble is brewing in domestic labour markets. In the US and Britain, mounting job losses are adding to consumer fearfulness. That leaves many households on unsteady financial legs while facing another large energy-related cost-of-living shock on top of the 20 per cent rise they have faced since 2022.

Might tech ride to the rescue as in 2025? AI is by far the most energy-hungry technology invented. A world of more expensive and uncertain energy risks temporarily derailing, or at least slowing, the tech train – and with it, the single most powerful engine of global growth.

Collectively, these are powerful stagflationary forces. The 2025 tech and tariff waves were economically and financially neutralising and pacifying. The 2026 clash of waves is amplifying and escalating. That spells precarity, not stability – economically, financially, fiscally, politically. That is why this time is different. FINANCIAL TIMES

Andy Haldane, an FT contributing editor, is a former chief economist at the Bank of England