Taiwan’s largest-ever Han Kuang military exercises are underway, with fighter jets redeploying to the east and ground forces simulating battlefield rescues to boost realism and readiness. The drills aim to test the military’s ability to respond quickly under pressure and show the public that both the threats and the country’s defense capabilities are real.

My firm, which is responsible for making markets for more than 900 public companies on the New York Stock Exchange, estimates a short-term US stock market collapse of up to 34 per cent in the event of...