As the United States continued its military buildup in the Gulf today, recessionary fears swept the globe with plunging stock markets, huge US layoffs, and sharply lower growth forecasts.
After Wall Street resumed its slide yesterday to three-year lows, major stock markets in Asia weakened today despite efforts by central banks worldwide to bolster confidence by cutting interest rates.
Traders in Tokyo, Sydney, Hong Kong and other Asia-Pacific centres took cover amid growing fears the world economy could plunge into recession as major US aviation companies, including aircraft giant Boeing, announced tens of thousands of layoffs.
Acknowledging the US economy faces "tough times," US President Mr George Bush pledged to work with Congress to keep America's economic heart beating smoothly.
"This has shocked our economy and we're going to respond," he told reporters yesterday after meeting with congressional leaders.
The White House has proposed a bailout - including $5 billion in cash assistance - for beleaguered US air carriers, many of which say as much as $17.5 billion is needed to avoid bankruptcies as travel demand collapses.
With Boeing's announcement of up to 30,000 layoffs and a combined 40,000 job cut from American and United Airlines, it was clear that the economy was taking a beating - and investors sent most of the major US indices tumbling to some of their lowest closes in three years.
Optimism has been tough to find on Wall Street, where investors have proven skittish despite major efforts to get the nation's stock markets back in business after their longest shut-down since the Great Depression of the 1930s.