Global markets are facing renewed turbulence as the Iran war, surging oil prices, rising government borrowing costs and concerns about an AI investment bubble unsettle investors. The risk is that inflation could remain high, forcing central banks to raise interest rates sharply, weakening economies and potentially triggering a stock-market crash or recession.

US borrowing costs have reached their highest level since 2007, while Washington’s debt is expected to exceed $40tn and oil has risen above $100 a barrel. The S&P 500 is about 3% below its record high, but its CAPE valuation measure is nearly 41, more than twice its long-term average of roughly 17; major central banks, including the Federal Reserve, European Central Bank and Bank of Japan, have responded to inflation fears with higher rates.