Donald Trump and Benjamin Netanyahu’s war has already caused untold damage to the global economy. The closure of the Strait of Hormuz, combined with Iranian attacks on fossil fuel infrastructure across the Middle East, has created a shock to global supply chains not seen since the Russian invasion of Ukraine.

Yet, so far, the market reaction has been relatively muted. In part, this is down to Trump fatigue. Investors have learned to price in a certain amount of volatility regarding Trump’s policy decisions. They know he is a febrile character, prone to making rash decisions before events force him to back down – just look at the trade war, or his threats to invade Greenland.

In short, investors don’t expect this war to last very long. But even if it doesn’t, the consequences of the conflict so far will be lasting. If the salvo continues over the next week, the impact on global supply chains would be significant. If it lasts any longer than that, we would be looking at an economic shock far larger than 2022.

For as long as the markets can kid themselves that this war will be over quickly, the reaction will remain relatively contained. But reality will sink in soon enough. The damage caused over the last week can’t be undone overnight. In fact, this latest conflict will add to the challenges facing an already weakened global economy.

Because the war hasn’t been the only thing moving markets this week. We’re also facing a crisis in private credit markets. Shadow banks like Blue Owl have been making huge and complex loans to tech companies, backed by cash from pension funds and retail investors. But investors have started asking for their money back, and Blue Owl hasn’t been able to honour its promises. If this crisis continues to spread, we could be looking at a shadow banking crisis.

The future looks bleak. The war will lead to rising prices for basic essentials like energy and food. Ongoing trade tensions and shipping delays will push up prices across the economy. Rising inflation will mean higher interest rates for longer. Disposable incomes will fall thanks to rising prices and borrowing costs.

Uncertainty and fear – combined with higher borrowing costs – could dampen trade and investment. Scared consumers may try to pay down debts and build up savings, reducing demand even further. Eventually, overzealous markets will come crashing down – and contagion will spread in unexpected ways. And our corrupt, unaccountable governments will be too busy spending billions on bombs to do anything about it.