By Sefa Yürükel
The Age of Nonlinear Risks
The third decade of the 21st century is witnessing a fundamental transformation in the nature of global risks. Contrary to the simple bipolar calculations of the Cold War or the “end of history” delusion of the 1990s, today’s threat environment is nonlinear and characterized by intense mutual interdependence. A deterioration in the balance sheet of a financial institution can trigger an energy supply shock; the cancellation of a diplomatic agreement can ignite a regional war; and a regional war can turn into a macro-financial earthquake that collapses global supply chains and plunges the entire banking system into a default spiral.
Financial Fragility: Is a Major Bank Crisis on the Horizon?
Interest Rate Shock and Balance Sheet Erosion
The forced takeover of Silicon Valley Bank (SVB), Signature Bank in the U.S., and subsequently Credit Suisse by UBS in Europe in March 2023 were symptoms of a “balance sheet recession” spreading across the global economy. Central banks (the Fed, ECB, BoE) entering one of the most aggressive interest rate hiking cycles in history to combat inflation created a structural gap in banks’ asset and liability management (ALM). Long-term government bonds and mortgage backed securities heavily purchased during the low interest period fell far below their market value as rates rose. According to FDIC data, unrealized securities losses in the U.S. banking system alone exceeded $500 billion as of the end of 2023 (Federal Deposit Insurance Corporation [FDIC], 2024). This indicates a massive “negative cliff” at the core of the system.
Commercial Real Estate and the Shadow Banking Threat
Even more critical is the crisis in the commercial real estate (CRE) market. Post-pandemic hybrid work models sharply reduced the value of office buildings. In the 2025-2026 maturity period, approximately $1.5 trillion in CRE loans in the U.S. will need refinancing (Goldman Sachs, 2024). A significant portion of these loans is financed by the unregulated “shadow banking” sector (private equity funds, REITs, direct lenders). A CRE collapse could hit this opaque sector, triggering the kind of systemic contagion seen in the 2008 housing market. This would directly hit sovereign bond markets, increase governments’ borrowing costs, and shrink the space allocated for defense spending in their budgets.
Geopolitical Consequence: The Reflection of Financial Fragility in Foreign Policy
From a historical perspective, there is a strong correlation between financial crises and the tendency of hegemonic powers to make major strategic mistakes. Britain’s withdrawal from the gold standard in 1931 fundamentally weakened its global imperial strategy. Today, the unsustainable trajectory of the U.S. national debt (over 120% of GDP) and the potential cost to the Treasury of a bank rescue operation could deprive Washington of the capacity to simultaneously resource two major conflicts (Ukraine and East Asia). Economic weakness is perceived by competitors as a window of opportunity for aggression.
The Prospect of a Great War: The Erosion of Deterrence and the Breadth of Fault Lines
Multipolarity and the Normalization of Conflict
The concept of a “great war” no longer only refers to a direct conflict between two nuclear superpowers but also the transformation of multiple regional conflicts into a global conflagration. The Ukraine War, while destroying the security architecture in Europe, is also straining and depleting global arms supply chains. According to the Stockholm International Peace Research Institute (SIPRI), global military spending reached a historic record of $2.4 trillion in 2023 (SIPRI, 2024). This arms race is taking place amid a shrinking economic pie, creating a security dilemma spiral: every country arms itself more to feel secure, but collectively, everyone feels less secure.
In the Middle East, the October 7, 2023 Hamas attack and the subsequent Gaza War demonstrated how quickly a conflict can draw in regional and global actors. The disruption of Red Sea trade by the Houthis in Yemen, the escalation potential of the low-intensity conflict between Hezbollah and Israel in Lebanon, and the proxy elements in Iraq and Syria indicate that a regional war is on the brink.
The Thucydides Trap and Escalation Risk in East Asia
The more existential risk lies in East Asia. The structural stress between a rising power (China) and an established power (the U.S.), conceptualized as the “Thucydides Trap” by Graham Allison (2017) of Harvard Kennedy School, carries the potential to turn into a hot conflict, especially in the Taiwan Strait. Such a conflict inherently goes far beyond a “trade war.” The loss of Taiwan, which holds over 90% of global chip manufacturing, could bring the world economy to a standstill overnight. The capacity of a Western alliance grappling with a banking crisis to withstand such a supply chain shock is seriously questionable. This provides China with a rational calculation field suggesting the West lacks the appetite for war at the moment of financial collapse.
The Catalyst: The Cancellation of the Signing Ceremony with Iran and the Dynamics of Political Crisis
The most critical and tangible connection point between these two enormous risk clusters (economic collapse and great war) is Iran. A “signing ceremony” planned with Iran and cancelled at the last minute (whether the revival of the nuclear deal, a further stage of Saudi-Iran normalization, or a comprehensive economic cooperation package) could be the straw that breaks the camel’s back for global stability.
The Nuclear Threshold and the Military Escalation Dynamic
Iran’s nuclear program is approaching the “breakout” capacity every day. Reports from the International Atomic Energy Agency (IAEA) confirm that Iran’s stock of uranium enriched to 60% purity is at a threshold that can reach weapons grade in a short time (IAEA, 2024). If the cancelled agreement was the last diplomatic chance to monitor and limit this program, the consequences are severe. The declaration that the door to diplomacy is closed prepares the ground of legitimacy for Israel and hawkish circles in the U.S. to push for the “military option.” A major attack on Iran’s nuclear facilities would immediately turn into an energy war across the entire Persian Gulf. Iran closing the Strait of Hormuz would instantly wipe out approximately 20% of global oil supply from the market.
The Energy Shock and the Multiplier Effect on Economic Crisis
At this point, the political crisis directly connects to the banking crisis. According to scenario analyses by global economic modeling firm Oxford Economics, the closure of the Strait of Hormuz could push oil prices above $150 per barrel (Oxford Economics, 2023). An energy shock of this magnitude would plunge Western economies struggling with inflation into a deep recession. In this stagflationary environment, a second and lethal blow would hit bank balance sheets loaded with devalued government bonds due to high interest rates. Corporate bankruptcies and mortgage defaults would explode. The regional bank crises experienced in 2023 would, in this scenario, turn into a global, systemic “Great Financial Crisis.” The cancellation of the Iran agreement functions not only as a cause for war but also as a purpose built economic trigger to collapse the global financial system.
Domestic Political Reflections and the Erosion of Alliances
Another dimension of the cancellation is the political crisis within alliance systems. If this cancellation occurs due to political dynamics within the U.S. or the EU (for example, the influence of pressure groups that view any dialogue with the Iranian regime as betrayal), it creates a deep rift in the Western alliance. The European Union finds that it has lost diplomacy, the last trump card to prevent a war to whose direct consequences, such as energy security and migration waves, it would be exposed. Similarly, if a normalization process progressing with China’s mediation stalls, this provides Beijing with a narrative that the U.S. is undermining all constructive processes in the region, giving it an asset to further tighten the anti-Western bloc.
Conclusion: Breaking the Spiral or Being Dragged Along
The simultaneous emergence of these three possibilities (bank crisis, great war, the bankruptcy of Iran diplomacy) is not a coincidence but a manifestation of systemic fragility. As Minsky (1986) stated in his financial instability hypothesis, stability itself sows the seeds of instability. The long period of low interest rates has created a debt mountain ready to explode today. Similarly, the prolonged failure of diplomacy sows the seeds of war. The cancellation of the Iran agreement is the most dangerous intersection point of these two spheres (economic and military).
The world is drifting toward a “perfect storm” where these three crises feed each other. The steps that need to be taken to reverse this course are clear but remain distant due to a lack of political will: First, to reduce financial fragilities, hidden losses on bank balance sheets must be made transparent, and aggressive macroprudential tightening must be implemented. Second, the concept of deterrence must be rebuilt, but this must be supported not only by military buildup but also by a robust economic defense (energy independence, supply chain diversity) that changes the rational calculations of rivals. Third and most urgently, diplomatic channels with Iran must be kept open, no matter how costly and risky they may seem. Because when the table of diplomacy is overthrown, what is set up in its place is not only the table of war but also the accelerator of the process leading to the collapse of global finance.
References
Allison, G. (2017). Destined for War: Can America and China Escape Thucydides’s Trap? Houghton Mifflin Harcourt.
Federal Deposit Insurance Corporation (FDIC). (2024). Quarterly Banking Profile: Fourth Quarter 2023. FDIC.
Goldman Sachs Global Research. (2024). The CRE Maturity Wall: Refinancing Risk in a Higher-for-Longer World. Goldman Sachs.
International Atomic Energy Agency (IAEA). (2024). Verification and Monitoring in the Islamic Republic of Iran in Light of United Nations Security Council Resolution 2231 (2015). GOV/2024/1.
Minsky, H. P. (1986). Stabilizing an Unstable Economy. Yale University Press.
Oxford Economics. (2023). Escalation Scenarios: The Economic Impact of a Middle East Conflict Disrupting Energy Supplies. Oxford Economics Research Briefing.
Stockholm International Peace Research Institute (SIPRI). (2024). Trends in World Military Expenditure, 2023. SIPRI Fact Sheet.
Tooze, A. (2021). Shutdown: How Covid Shook the World’s Economy. Viking.
International Monetary Fund (IMF). (2024, April). Global Financial Stability Report: The Last Mile: Financial Vulnerabilities and Risks. IMF.
U.S. Energy Information Administration (EIA). (2024). World Oil Transit Chokepoints. EIA.
Sefa Yürükel
Danish ethnographer and social anthropologist (MA)
Aarhus University, 1997
Independent Researcher
Fields of Research: International Politics, Public International Law, Geopolitics, Sociology, Psychology, Cultural Studies, Systems and Structures.
Bir yanıt yazın