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Anthony Rowley

A century on, T.S. Eliot’s poem The Hollow Men strikes a disturbingly ominous note: This is the way the world ends / Not with a bang but a whimper.
With the way things are going at present, we could be about to find out which of these endings it will be. The hope is that the Iran-centred conflagration in the Middle East will not turn into a nuclear apocalypse and that the “whimper” will be merely a cry from the depths of global economic recession.
But either scenario is possible while the Trump administration remains in office and as hostility and rearmament gather pace among powers great and small. It’s worth remembering that the second world war came on the heels of the Great Depression in the 1930s.
Economic misery provokes an increase in trade protectionism and defence spending that is meant to provide employment, which in turn feeds into a nothing-to-lose mentality and military adventurism, as history has shown.
This time, the threat is of a greater magnitude. As Chatham House put it in a recent headline, “The Iran war risks triggering a new wave of nuclear proliferation”. It seems to be widely assumed that the latest Gulf war will end within months or even weeks from now. But setting aside the direct economic impact, the lasting effects on consumer, business and investor confidence are being overlooked.


We are talking about a situation of shock and trauma, not simply one of uncertainty and concern. Why would anyone wish to invest in anything for the longer term if they fear there might not be a longer term, or that the future will be even worse than the present?
This might seem like doom-mongering but there is undeniably a feeling that things are spinning out of control – so far out of control that Donald Trump’s White House is signalling an openness to retreat (and defeat) and finding itself at odds with a bellicose Israel.
Trump has threatened, one way or another, Iran, Venezuela, Cuba, Mexico, Greenland, Canada and others while endangering global energy supplies and costs, generating inflation and provoking domestic protests, to name but a few of his rash actions.
Financial markets have so far demonstrated resilience but how much of this is due to their supposed ability to discount future threats (and take a relatively sanguine view as a result) and how much to the fact that misplaced faith among investors assures markets of continued funding even in the face of impending disaster?
As an IMF blog stated on March 30: “The world faces yet another shock.” The war in the Middle East, it said, is upending lives and livelihoods in the region and beyond. Meanwhile, it noted, the Gulf war has unsettled investors. “Global stock prices have declined, bond yields have risen across major advanced economies and many emerging markets, and volatility has increased.” The sell-off has so far been contained compared with past global shocks, it added, but financial conditions worldwide have tightened.


That is an understatement. Markets are facing a future in which it seems their worst-case scenario is a puncturing of the artificial intelligence bubble and a consequent slump on Wall Street when they should in fact be discounting more dystopian threats.
Two apparent anomalies stand out in recent market movements – the rising dollar and falling gold prices. In times of war, the US dollar should logically be retreating in line with investor fears of a spreading conflagration.
If there has been a flight to safety in financial markets, it has been muted so far. This might be partly because there is hardly anywhere else to go at a time when equities are already richly valued, bonds are being issued in profusion and private markets are showing signs of illiquidity.
The drop in gold prices from comfortably above US$5,000 an ounce to the mid-US$4,000 range appears odd at first sight. Gold is, after all, regarded as the asset of first resort in times of financial and geopolitical turmoil.

This drop has been due to a number of factors, according to experts speaking at an S&P Global webinar held on April 1. Individual and institutional investors have been selling the precious metal to meet margin calls in respect of investments in equity and bond markets, while some central banks have been selling to defend their national currencies and shore up their reserve holdings, to prepare for economic and financial contingencies arising from the Middle East war and its aftermath.
A recent commentary on the Official Monetary and Financial Institutions Forum observed that the US dollar’s appreciation is not solely a function of risk aversion. “As energy prices rise and inflation risks intensify, markets have tempered their expectations for interest rate cuts in the US,” it said. These higher-for-longer rate assumptions amplify the safe-haven appeal of dollar assets.
On the other hand, gold’s decline “reflects the influence of higher expectations for borrowing costs, which tend to weigh on non-yielding assets. Yet despite this short-term weakness, gold remains significantly higher, suggesting that investors continue to view it as a hedge against broader macroeconomic risks”.
Those risks seem unknowable during the unpredictable reign of Trump – shades of Caligula, the famously mad Roman emperor who is said to have planned to confer the status of consul on his horse. But Caligula was assassinated, heaven forbid, by officers of the Praetorian Guard in a conspiracy that also involved the Senate.


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Can world markets ride out the rest of Trump’s reign?

US President Donald Trump arrives to speak about the Iran war from the Cross Hall of the White House on April 1. Photo: AP


A trader works on the floor of the New York Stock Exchange on March 18, as a screen shows the press conference by US Federal Reserve chair Jerome Powell following the Fed rate announcement. Photo: Reuters

How East Asia is being quietly reordered by the US war on Iran

Illustration: Craig Stephens

Chinese and Philippine officials hold back-to-back talks on the South China Sea in Quanzhou, China, on March 27-28. Photo: Handout

US crude tops US$110, Wall Street falls after Trump vows more Iran attacks

A trader works on the floor of the New York Stock Exchange at the opening bell in New York on Thursday. Wall Street stocks tumbled early Thursday on the latest jump in oil prices as tough rhetoric between the United States and Iran reduced hopes of a Middle East war resolution. Photo: AFP

As oil-shocked world turns to renewables, China will reap the rewards

The Xianshuiwo photovoltaic power plant in the Yi-Hui-Miao autonomous county of Weining, in southwest China’s guizhou province, is seen on July 3, 2025. Photo: Xinhua

Opinion

World Opinion

Business

Two apparent anomalies stand out in recent market movements – the rising dollar and falling gold prices


Two apparent anomalies stand out in recent market movements – the rising dollar and falling gold prices.


Donald Trump

Middle East

Central banks

Commodities

Iran

United States

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

Macroscope

Can world markets ride out the rest of Trump’s reign?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Two apparent anomalies stand out in recent market movements – the rising dollar and falling gold prices

Two apparent anomalies stand out in recent market movements – the rising dollar and falling gold prices