Trump’s high stakes gamble aimed at forcing Iran to bow to his demands has sent oil prices rocketing. It’s sent a fresh jolt of pessimism through financial markets with the FTSE 100 opening lower. Brent Crude, the benchmark, shot up by 8% to 103 a barrel, with prices fluctuating around this highly elevated level. By blockading the Strait of Hormuz, Trump is turning Iran’s chokepoint into a US stranglehold. The prospect of all tankers ceasing transit through this key waterway is making the energy crisis even more acute.

Trump does have a track record of pulling back from the brink, especially when markets react negatively, and so there will be hopes that he’ll remain true to form and an agreement can be salvaged sooner rather than later. But in the meantime, investors should be prepared for more turbulence.

Iran’s oil had been flowing, and sanctions had been temporarily lifted to keep a lid on prices to limit financial and political fallout. So, there’s more than a hint of desperation in this drastic action. It seems the US has been cornered by Iran’s defiance, with hopes of an offramp replaced by fears of a dangerous escalation. Trump is willing to send the prices of oil, gas and other commodities sky-high, in the hope it’ll force concessions from Iran. China is Iran’s key customer, and this appears to be a ruse to provoke Beijing into piling pressure on Tehran. The backlash back home if this strategy doesn’t work is likely to be severe and there’s already deep unease spreading.

The bellicose attitude of the US is set to see it lose more friends and influence around the world. Vice President Vance’s failed weekend talks followed his show of support for Hungary’s Victor Orban, who has just been defeated after 16 years in power. The Hungarian political earthquake marks a seismic shift away from the right-wing populism, trumpeted by the US administration. The stunning landslide victory of Peter Magyar’s Tisza party shows the determination of Hungarians to sweep away authoritarian policies and corruption which drove a wedge between the country and other European Union nations. The Hungarian forint has surged, rising by 2% against the euro and 1.7% against the dollar, amid hopes that suspended funding from Europe will start to flow again and boost the economy.

There are now hopes for greater European cooperation and unity, and the UK government is also edging closer to EU allies. Keir Starmer’s plan to align the UK with single market regulations would remove red tape for businesses and make it much easier to trade with the bloc. As the UK economy is set to struggle to cling onto growth this year, amid the Middle East crisis, restoring more frictionless trade with Europe would offer respite to companies which have seen exports to the bloc decimated since Brexit. Many are now bracing for further pain from the Middle East crisis, and the prospect of an improvement in European trade will bring some optimism.

For now, though, there’s still huge trepidation about the repercussions of the ongoing Iran crisis. A storm of price rises is on the way, with fuel, food, bills and housing costs set to rise further. As inflation is set to ramp up as the economy struggles, a toxic and persistent stagflation scenario risks emerging. Interest rates are set to rise, just as other financial pain points flare up, and a miserable May looms after an anxiety-laden April. Housebuilders have fallen back in early trade, as expectations that the Bank of England will push up rates intensify. It will make moving to larger properties or getting a foot on the housing ladder a lot more expensive, and the housing market is set for a difficult period.

Even if the ceasefire holds, it still will take months for shipping traffic through the strait to normalise given that hundreds of tankers are anchored outside the Gulf waiting for safe passage and there’s a log jam of thousands of containers. Given the widespread damage to energy facilities across the region, production was already set to take years to be restored to pre-conflict levels.

As the situation appears increasingly complex to resolve, there’s a recognition that countries around the world will have to batten down the hatches and prepare for a longer crisis. This will intensify cost-of-living pressures for not just millions but billions of consumers around the world. More energy rationing is likely, with South Asian countries having already implemented emergency measures. The next two to three weeks will be crucial and could determine the extent of potential official wider rationing measures in the UK and Europe.

The aviation industry is bracing for an extraordinary period ahead, with jet fuel shortages looming and route disruption expected. Airlines were among the biggest fallers in early trade with British Airways owner IAG falling 2.3% and easyJet down 3%. Rolls Royce also fell by around 1.7%. It earns a significant chunk of revenue from servicing aircraft engines, and so will be affected by lower flying hours of fleets of planes.

The UK is particularly vulnerable to a jet fuel crisis, given its reliance on exports from Kuwait and Saudi Arabia. The last pre-crisis shipments have now arrived from the Middle East and the countdown is on before supply risks emerge. There’s a growing chance that leisure flights could start being cancelled from May if carriers are unable to source enough fuel from other producing nations. It’s going to be a challenge given other countries are also on the hunt for new suppliers, and it seems highly likely that prices will ramp higher as demand shoots up. Airline seat prices have already risen by around a fifth and are likely to become more expensive as the busy summer season approaches.