New Delhi, Aug. 10 -- Brent crude was in the low $70s a barrel at the beginning of July. Four weeks later, amid open talk in the US of a "massive attack" on Iran, it soared past $100, up more than 35%. The dollar strengthened and Treasury bonds maintained their role as the world's safe haven. While this appears to showcase US economic primacy, a closer look reveals a disconcerting reality: the developed world's diminishing capacity to absorb shocks.

Unlike the oil crises of 1973, 1990 and 2003, the 2026 Hormuz crisis has hit a world grappling with record public debt, persistent budget deficits, high real interest rates and an ageing population. The approach of easing monetary policy while also running large deficits is staring at its lim...