Financial markets are rapidly pivoting from cautious optimism to full pricing of a prolonged Middle East supply shock, with about $6 trillion erased from global stocks since the Iran conflict began. President Trump's signaling of further attacks and dismissal of $100 oil as "a small price to pay" dashed hopes for containment, sending Brent crude surging 29% intraday and triggering a massive risk-off across Asian equities.

The selloff accelerated across time zones, with Asian markets tumbling as much as 5.6% and foreign investors withdrawing $14.2 billion from emerging Asian stocks last week. Trading floors reported strained systems from client inquiries, while volatility gauges in Japan and India jumped 62% and 23% respectively. The stampede to sell risk assets reflected growing stagflation fears as energy prices threaten global growth.

Governments in South Korea and Taiwan are now weighing market stabilization measures as they explore ways to cap domestic fuel costs. The geopolitical shock is colliding with concerns about the AI capex cycle peak, while traders have pushed back Fed rate cut expectations from July to September. Investors are increasing cash levels as they brace for what could be a prolonged period of economic uncertainty with no clear end in sight.