Flash crash! Recession trading erupts worldwide

The Middle East situation has resurfaced with new variables, reshaping the underlying logic of global markets.

Looking at the performance of major global asset classes recently, a set of extremely unusual combinations is happening at the same time.

Oil and natural gas have surged continuously, while gold and silver have seen a rare plunge. London copper, London aluminum, London tin, and other industrial metals have all fallen sharply in tandem, and global stock markets are also under extreme pressure.

Since March, ICE Brent crude oil is up 39.76%, while COMEX gold is down 12.82%.

(This article lists objective data only and does not constitute any investment advice.)

Why isn’t safe-haven demand lifting as war breaks out? Why has gold suddenly crashed?

If you use the logic from the past, none of this makes sense.

But if you switch perspectives—you’ll find that what the market is trading is no longer war.

Instead, it is a more dangerous logic: “the recession trade.”

At the core of this round of volatility is not the war itself, but the “shock” caused by the war.

The logic chain is very clear: Middle East conflict escalates → oil and gas surge → inflation expectations rise → rate-cut expectations collapse → interest rates move back upward.

In just a few weeks, the market narrative has undergone a dramatic switch: previously, people were discussing when the Fed would cut rates; now it is whether it will raise rates again.

Jeffrey Gundlach, known as the “new bond king,” directly offered his judgment: U.S. 2-year Treasury yields have risen by about 50 basis points in less than three weeks, meaning the rates market has already priced in the possibility of rate hikes.

On the same day, Wall Street effectively abandoned its bets on rate cuts in 2026.

And this is precisely the root cause of gold’s decline—when rates rise, gold, which does not pay interest, naturally loses its appeal.

If gold’s drop reflects “the interest-rate logic,” then the plunge in industrial metals reflects a deeper fear: expectations of a global economic recession.

In the LME market: aluminum prices fell more than 8% in a single day, the biggest drop since 2018; copper fell more than 5%; and tin crashed 7%.

This kind of synchronized selloff in “precious metals + industrial metals” is not common in history. Behind it is not a single supply-and-demand change, but the market beginning to trade a more dangerous path: higher oil prices not only boost inflation; they also raise economic costs, ultimately suppressing demand and dragging down growth.

That is also why the logic behind the stock market’s decline is gradually converging with commodities—the oil price is shifting from an “inflation variable” to a “recession trigger.”

In the past five oil shocks, four ultimately led to global economic recessions.

This time, the world has already started pricing it in early: major international investment banks cut their S&P 500 target levels; if oil stays at around $110, corporate earnings could fall by 2%—5%; and for every 10% increase in oil prices, the U.S. GDP growth rate could drop by 15–20 basis points.

Historically, after oil prices rise by about 30%, stock markets and oil prices often turn “negatively correlated”—the higher the oil, the greater the pressure on risk assets.

This is also why—when crude oil is rising, nearly all assets are falling.

In essence, this is a return to a typical “recession trade”: on one side, energy-driven inflation pressure; on the other, growth worries brought by weakening demand. Meanwhile, before inflation clearly recedes, the Fed is unlikely to release liquidity, leaving asset prices under broad pressure.

For the turmoil in the Middle East, the well-known investor Danbi Bu has a relatively optimistic view.

Bu believes that although both are major black swan events, the 2025 trade war and the current Iran-U.S. conflict in 2026 have completely different impacts on the Nasdaq index, and the level of market panic is far from the same.

Bu said: “The 2025 trade war is a systemic blow to global industrial chains and corporate earnings. With the U.S. and China imposing high tariffs against each other, it directly hits the costs and growth expectations of tech giants. Combined with the pressure from high interest rates and high valuations, the market worries about a comprehensive recession, and panic spreads. The Nasdaq has fallen more than 30% from its historical high and has entered a technical bear market—meaning a deep adjustment driven by trends and fundamentals.

The 2026 war between Iran and the U.S. is more of a short-term sentiment shock driven by geopolitics. The conflict pushes up oil prices and triggers safe-haven sentiment, but it has limited impact on the earnings of technology companies. It does not undermine the AI industry cycle or the cash-flow resilience of leading companies. The market views it as a localized and phased event, with the index only seeing a moderate pullback and no extreme panic.

In short, the 2025 trade war shakes the foundation of earnings, while the current Iran-U.S. conflict only affects risk appetite.

Of course, if the fighting drags on and cannot be resolved in the future, it cannot be ruled out that it will trigger even more severe market panic.”

Based on the market narratives being traded right now, the real disagreement is not whether prices will rise or fall, but a more core question: is this conflict a short-term disruption, or a long-term variable?

If it is only a phase-specific shock, then as oil prices fall and inflation eases, rate-pressure will gradually be relieved, and the market is likely to return to a framework led by growth and liquidity.

But if the conflict becomes long-term— or even reaches key energy corridors— then high oil prices will persist, and the conflict between inflation and growth will be continuously amplified. The market may enter a more unfamiliar range: no easing, no high growth—only higher cost of capital and more fragile demand.

That is also why it is said that the Middle East fighting is not only affecting oil prices—it is changing the entire market’s “pricing coordinate system.”

When oil prices become the core variable again, when interest rates once again lead asset prices, and when geopolitics returns to the main storyline, the investment logic that has been familiar over the past few years is quietly starting to fail.