The Bank for International Settlements (BIS) has issued a stark warning that a prolonged conflict in the Middle East could significantly worsen global economic pain, pushing interest rates higher and triggering financial market turmoil. Hyun Song Shin, BIS Chief Economist, emphasized that extended hostilities risk amplifying macroeconomic damage through financial market disruptions. Oil prices surged nearly 35% following the Strait of Hormuz closure, driving equity and bond sell-offs as investors fear higher borrowing costs and potential government fiscal strain. Software as a Service (SaaS) funds have seen significant outflows, with $500 billion in lending to SaaS companies growing rapidly since 2015, now comprising 19% of total direct lending; these funds have underperformed by 5% due to investor flight. Shin cautioned that persistent conflict could lead to sharper inflation expectations and financial instability, pressuring asset valuations and private credit markets, though he noted current credit risks to the real economy remain manageable.