For much of the past decade markets were cushioned by a comforting assumption: whatever the shock, liquidity would arrive in time. Central banks would ease, governments would spend and investors could keep treating geopolitics as noise around a larger upward trend in asset prices.
That assumption is starting to fail. The real risk facing markets now is not one dramatic event but the convergence of three slower-moving pressures: debt that has become structurally harder to finance, energy routes that remain vulnerable to disruption and private assets whose liquidity looks far thinner under stress than their marketing once implied. Each on its own is manageable. Together, they create a system that is less resilient than headline equity indices suggest.
US federal debt stood at about $37.6-trillion in fiscal 2025, about 124% of GDP, while the congressional budget office projected a budget deficit near $1.9-trillion for the year. At those levels, interest rates are no longer just a market signal; they become a national constraint. When a sovereign carries debt of that scale, even modest increases in yields feed quickly into borrowing costs, fiscal choices and investor psychology.
This matters because markets are no longer operating in a clean disinflation story. The US Federal Reserve’s own history of the 1970s makes clear that oil shocks do not have to be the sole cause of inflation to be economically decisive. They can reignite price fears, scramble monetary expectations and hit consumers already under pressure. That lesson has become relevant again.
The Strait of Hormuz remains one of the world’s critical economic choke points. According to the US Energy Information Administration, more than a quarter of global seaborne oil trade and about a fifth of global oil consumption moved through the strait in 2024 and early 2025. About a fifth of global liquefied natural gas trade also passed through it. That does not guarantee a lasting shortage every time tensions flare. It does mean any serious threat to shipping in the region can push up freight and insurance costs as well as inflation expectations almost immediately.
What makes this cycle more uncomfortable is that energy stress is occurring when the financial system is already more sensitive to rates than it used to be. In a normal downturn, investors expect bonds to rally and central banks to ride to the rescue. But in a stagflation scare that script breaks down. Markets are unsure whether to price slower growth or stickier inflation first, so they do both badly.
Then there is private credit, the market that flourished when money was cheap and investors were desperate for yield. Its growth was spectacular, but its promise always depended on a quiet condition: that not too many investors would want their money back at once. That condition is now being tested. Redemption requests have surged, resulting in withdrawal limitations from private credit funds. That is not a sign of collapse. It is a sign that the distinction between yield and liquidity is being rediscovered the hard way.
The attraction of gold in this environment is not hard to understand. It is volatile and can still sell off when investors scramble for cash, but it is outside the credit chain. The World Gold Council said total gold demand in 2025 exceeded 5,000 tonnes for the first time, helped by strong exchange-traded fund inflows and continued bar and coin buying. Investors appear to be paying up not for excitement but for insulation from a world in which financial claims are starting to look less frictionless than they did a few years ago.
The market message is simpler than the politics surrounding it. The age of easy financing is giving way to one of harder trade-offs. Debt is expensive again. Energy still matters. Illiquidity is real. And markets that spent years being rescued are having to remember what vulnerability feels like.
• Muchena is founder of Proudly Associated and author of ‘Artificial Intelligence Applied’ and ‘Tokenized Trillions’.
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