Protracted Iran war rattles global markets with stocks down, currencies under pressure and gold surging

The war with Iran that erupted in 2026 continues to cast a long shadow over global financial markets as of August. When fighting intensified in early March, major benchmarks such as the Dow Jones Industrial Average and the S&P 500 fell, while Pakistan’s KSE‑100 index suffered its largest one‑day drop on record, plunging more than 9%. Investors rushed out of risk assets and into traditional safe havens, driving gold prices sharply higher.

Emerging markets have been hit particularly hard, with local currencies weakening and capital outflows accelerating. Turkey’s central bank, for example, has taken steps to stabilize the lira through a mix of foreign‑exchange interventions and policy measures, a pattern echoed across several vulnerable economies. For countries heavily reliant on energy imports, violent swings in oil prices are straining current‑account balances and government finances, pushing up sovereign bond yields and stoking concerns about credit risk.

At the same time, elevated inflation and war‑related supply shocks have left major central banks with limited room to cut interest rates, trapping them between the need to support growth and the imperative to keep prices in check. Market participants increasingly see geopolitics as a core driver of cross‑asset performance, prompting a renewed focus on broad diversification across equities, bonds and commodities, and on strategic allocations to real assets such as gold as a hedge against prolonged instability.