A significant "black swan" event has rattled global markets, stemming from developments concerning the Strait of Hormuz. Former US President Donald Trump is seen as having artificially created this market shock.
Global markets experienced a sharp decline on April 2nd. Oil prices surged while stocks and bonds fell. This followed a warning from Trump that the US would launch a "very heavy" strike on Iran within the next two to three weeks, shattering market expectations that the ongoing five-week Middle East conflict was nearing an end.
Brent crude oil jumped 6.6%, approaching $108 per barrel. As the conflict continues, the Strait of Hormuz, a critical channel for Middle East energy transportation, is effectively closed, leading to further supply constraints. Trump indicated that the strait would "naturally" reopen once hostilities ease but provided no specific details or a clear timeline.
Following Trump's comments, stock markets retreated, interrupting a fledgling global rebound. Markets are concerned that a prolonged war will drive oil prices higher and hamper economic growth.
In China, the three major A-share indices all closed lower. The Shanghai Composite Index fell 0.74%, the Shenzhen Component Index dropped 1.6%, and the ChiNext Index declined 2.31%. Across the markets, 1,052 stocks advanced, with 32 hitting the daily limit-up, while 4,378 stocks declined.
Oil and gas stocks bucked the trend and moved higher. Pharmaceutical stocks showed repeated activity. On the downside, the precious metals sector fell, with Xiaocheng Technology dropping over 7%. Stocks related to computing power leasing also adjusted.
European markets opened with heavy losses. Asia-Pacific markets collectively experienced a sharp sell-off. US stock index futures for the three major indices fell over 1% in pre-market trading. Crude oil prices rose more than 6%.
Meanwhile, the United Arab Emirates has called on the United Nations to authorize a range of measures, including the use of force, to reopen the Strait of Hormuz. Gulf nations are currently pressuring Iran to restore free passage through this vital global energy channel.
In a letter to the UN Secretary-General and the President of the Security Council, the UAE's permanent representative to the UN requested "immediate action" by the Council to "ensure the safety of navigation and the rights and freedoms of navigation in the Strait of Hormuz and its adjacent waters."
The UAE's letter invokes Chapter VII of the UN Charter, which allows the Security Council to authorize the use of force or other measures, including economic blockades and severing diplomatic relations, in response to threats to peace or acts of aggression.
A resolution itself would not establish a new UN mission, but if approved by the UN, it would provide Gulf states with a degree of diplomatic backing should they decide to participate in military action or form a naval task force to challenge Iranian control of the strait or patrol and maintain order in the waterway after the conflict.
Additionally, the UK is set to host an online meeting bringing together foreign ministers from about 35 countries, including the UAE, France, Germany, Italy, Canada, and Japan, to discuss plans to restore freedom of navigation in the strait. The US is not expected to attend.
It is reported that this UK-led multinational coordination will focus on three paths: diplomatic, economic, and military. The current emphasis remains on diplomacy, coordinating countries that maintain communication channels with Tehran to push for negotiations. Should diplomatic efforts fail, relevant nations would consider economic measures targeting Iran's oil and shipping industries.
An expert on UN affairs from the International Crisis Group stated, "Even in these highly volatile times, many countries still place great importance on obtaining the 'umbrella' of a UN mandate to provide legitimacy for the use of force."
Currently, the UAE is the only Gulf Arab state that has explicitly expressed willingness to contribute naval forces to assist in reopening the Strait of Hormuz or provide escort for commercial vessels.
Last month, the UN Security Council condemned Iran's attacks on its Gulf neighbors and called on Iran to cease its strikes and restore freedom of navigation through the Strait of Hormuz.
Simultaneously, Bahrain, a non-permanent member of the Security Council, is pushing for a new resolution that would authorize the formation of a naval task force to reopen the strait.
The UN Security Council typically uses Chapter VII to authorize various actions, including allowing peacekeeping forces to use force to protect civilians. This clause also provides the legal basis for countries to use military force with UN "backing."
Historically, US presidents have often waited for Chapter VII authorization before launching military operations or used it to justify the legitimacy of such actions.
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