If we didn't need reminding, this morning's news from China and Afghanistan re-alerts us to how sudden turbulence from afar can smack financial markets.

The Shanghai Composite Index tumbled 8.8% today on fears of new Chinese government austerity measures. And other Asian markets slumped in harmony. Meanwhile, the Dow opened down 134 points and the NASDAQ fell 45.

But that's not all. This morning also featured a failed assassination attempt on Vice President Cheney in Afghanistan. And US saber rattling against Iran raises the possibility that the price of oil could hit $125 a barrel in the event of a US air strike on Iran. The reason is that Iran could blockade the 20-mile wide Straits of Hormuz through which 40% of the world's oil exports must flow in order to reach the market.

Meanwhile a weak durable goods orders report is reinforcing fears stoked by former Fed Chair Alan Greenspan that a recession is in the cards for the US economy. With Fannie Mae (NYSE: FNM) announcing this morning that it will tighten its subprime mortgage standards, the hissing sound of a deflating housing bubble just ramped up its decibel level.

No wonder Americans would rather bury their heads in news of Anna Nicole Smith and Britney Spears. And for frightened investors, the best refuge may be money market funds and gold.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm, He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Fannie Mae.