Investors are expecting Donald Trump to back down in the war with Iran – but what if he doesn’t?

Global markets have become inured to the US president’s posturing over the past year, but economists warn they may be ‘a little bit complacent’ in anticipating a short conflict in the Middle East

Investors over the past year have learned that Donald Trump has a boundless capacity to quickly reverse course in the face of acute political or market pressures.

But a week since the United States and Israel launched missile strikes on Iran, there are fears the war could morph into a protracted conflict.

In purely economic terms, the war has brought about what has long been considered a worst-case scenario from a conflict in the Middle East: the closure of the strait of Hormuz, through which travels a fifth of the world’s oil and gas supplies.

Since the start of the hostilities, the global benchmark oil price has jumped by 17% to more than US$85 a barrel, triggering shock waves through financial markets.