As catastrophe at home prompts Japan to repatriate chunks of its vast wealth, it is pulling the rug from under stock and bond markets thousands of miles away.
© unknownThe twin crises of Japan and the Gulf come as fiscal tightening in the West and credit tightening in China start to bite.
We are discovering once again that the country is the world's top creditor by far with nearly £2 trillion of net assets overseas.
The risk is doubly dangerous when combined with the fast-escalating conflict in the Persian Gulf, where Saudi Arabia's use of troops to suppress Shi'ite dissent in Bahrain risks a showdown with Iran.
"People had thought global recovery was self-sustaining and now equity markets are starting to ask whether it might be snuffed out," said David Bloom, currency chief at HSBC.
The twin crises come as fiscal tightening in the West and credit tightening in China start to bite. US economists such as Larry Summers and Paul Krugman fear recovery has not yet reached "escape velocity", leaving it vulnerable to external shocks.
"I am afraid we are near tipping point on global recovery," said Simon Derrick from BNY Mellon. "The fact has oil has not risen despite the latest events in the Mid-East tells you a lot about growth in the second half of this year. All the inflation talk may fade away as in 2008."
HSBC said the pattern after the 1987 crash, the 1998 Asia crisis, and Lehman's collapse, was that Japanese repatriation kicked in violently with a lag of a week. The impact may be greater this time given the trauma, and power-rationing as 11 nuclear reactors are shut down.
"This overseas wealth is like a crisis fund: this is what it is for," said Mr Bloom.
The sudden snap back in capital flows vastly outweighs the global impact of lost output, though that too is significant given plant closures by Toyota and others.
HSBC said appetite for "Uridashi" bonds of countries such as Brazil, South Africa, and Australia has "collapsed", cutting off a key source of fresh funding. The bigger effect is liquidation of global assets built up during the "carry trade", when Japan's insurers, funds and famed housewives ("Mrs Watanabe") fled zero rates to chase yield abroad. These assets include UK equities, US municipal bonds and commodity funds.
This is why an earthquake in a region covering 6pc of Japan's economy - or less than 0.5pc of global output - has set off a global rout.
Other dangers abound. CreditSights said Japan's three top banks hold $1 trillion (£62bn) of local equities. These holdings are underwater once the Topix index falls much below 800, hence the worries over the 16pc drop to 767 over the past two days.
The Bank of Japan keeps a close eye on equities and the yen. It has intervened with 21 trillion yen (£168bn) of liquidity and doubled bond purchases to 10 trillion yen to boost confidence.
Hans Redeker from BNP Paribas said the "pressure point" is the $3.9 trillion portfolio of government bonds held by the banks. The fiscal strain of the earthquake comes at time when tax revenue already covers less than half the budget, public debt is 225pc of GDP, and pension funds are becoming net sellers of bonds to meet payouts to the elderly.
The Bank of Japan may have to print money lavishly if the "deflationary equilibrium" of recent years breaks down, but this risks loss of confidence in Japan's $12 trillion debt stock, worth a fifth of global GDP. The central bank must walk a tightrope.
Meanwhile, events in Bahrain at the epicentre of global crude supplies are potentially just as threatening. Shi'ite protesters have denounced the arrival of Saudi forces to prop up Bahrain's Sunni king as an "act of war". What began a month ago as a civic rally for greater freedoms has evolved into a sectarian uprising by the Shia, 70pc of the island and with mixed Arab-Iranian ancestry. Iran called the Saudi move "unnacceptable", and left doubt that a bloody crackdown will prompt a response.
The risk group Exclusive Analysis said it expects "use of heavy force against protesters" as Sunni-Shia fighting breaks out, which in turn may cause Iran to "activate proxy militia to carry out attacks on security forces".
This would create a state of latent warfare between the two Gulf superpowers, and risk setting off a Shia uprising in Saudi Arabia's eastern province, home to giant Ghawar oil field.
David Murrin from Emergent said events had become unstoppable. "You can't put this explosive Shia energy back in a box. Nor can the Saudis try to pay them off because that won't change their ideology. There is a revolution under way in a region that underpins the US economy and the dollar," he said. Markets live: follow the effects of the Japanese disaster on the global economy.