Geopolitical sparks fuel market volatility

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Geopolitical sparks fuel market volatility

Published: 16 Apr. 2026, 00:05

Audio report: written by reporters, read by AI

Kim Sung-jae

The author is a business administration professor at Furman University and author of “The Story of Tariffs” (2025).

On Jan. 9, 1991, U.S. Secretary of State James Baker met Iraqi Foreign Minister Tariq Aziz in Geneva, five months after Iraqi forces under Saddam Hussein invaded Kuwait.

The seven-hour meeting ended without progress. Washington demanded Iraq’s unconditional withdrawal, while Baghdad insisted that Israeli forces first leave Palestinian and Syrian territories. Aziz refused to accept a letter from President George H. W. Bush setting Jan. 15 as the deadline.

U.S. Vice President JD Vance speaks during a press conference after meeting with representatives from Pakistan and Iran as Jared Kushner and Steve Witkoff, Special Envoy for Peace Missions, listen, on Sunday, April 12, in Islamabad, Pakistan. [REUTERS/YONHAP]

In November 1990, the United Nations Security Council authorized the use of “all necessary means” if Iraq failed to withdraw, marking the first such approval since the Korean War. Despite mounting pressure, Hussein did not yield.

Iraq appeared to underestimate the United States, assuming fears of casualties shaped by the Vietnam War would force an early ceasefire. Instead, the United States assembled a coalition of 42 countries.

From Jan. 17, coalition forces launched overwhelming airstrikes that crippled Iraq’s defenses and communications. A week later, the ground offensive proved equally decisive. The United States declared victory just 100 hours after ground operations began.

The Gulf War ended in a swift U.S. victory but left economic scars. After Iraq’s invasion of Kuwait, global oil prices surged about 40 percent. Inflation rose from around 4 percent to the 6 percent range. The Federal Reserve slowed its rate cuts despite concerns over slowing growth.

As the Fed hesitated, the economy slipped into recession under high rates and rising oil prices. Financial instability worsened as savings and loan institutions collapsed.

Today, ceasefire negotiations between the United States and Iran face difficulties. Oil prices are rising again, reflecting uncertainty, while inflationary pressure is increasing. The Fed has taken a cautious stance, making rate cuts unlikely.

This delay is also straining private credit, a key funding source for mid-sized firms. If it weakens, investment could fall and unemployment rise, adding pressure on growth. The consequences of war extend beyond geopolitics.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.