Global markets took the fall of Egypt's Hosni Mubarak and Tunisia's Zine El Abidine Ben Ali largely in stride, but the teetering of Libyan strongman Moammar Gadhafi has investors on edge. Since Gadhafi officially renounced his biological and chemical weapons programs in 2003, ending Western sanctions, Libya has become a real player in the regional and global economy. Here are four ways Gadhafi's ouster or a prolonged civil war — or both — could affect the world:

1. Oil panic sparks record prices
Africa's third-largest oil producer, Libya also has the continent's largest proven oil reserves. The prospect of a civil war or government overthrow helped send oil prices this week to their highest levels since September 2008. "The sky's the limit," analysts told Britain's The Independent, and oil could top the $147-a-barrel record "without breaking a sweat." Crude hit $108.70 a barrel in Europe on Monday, and U.S. prices rose to $96 a barrel. "There's no need to panic" yet, says Yale's Jeffrey Garten. But if this unrest spreads to Saudi Arabia, we'll have a "real nightmare scenario."

2. European trade takes a big hit
Once Western nations dropped their sanctions, Libya opened its doors for business. British and Italian companies signed huge oil deals, and France, the U.K., and Russia sealed lucrative arms agreements with Gadhafi's government. Libya returned the favor, investing its new wealth in British real estate, and Italian banks, soccer clubs, and automakers. Libya's investments would likely outlast Gadhafi, so as not to "rattle investors," says Nomura analyst Alistair Newton. But any of the billions in personal investments by Gadhafi and the ruling elite would be jeopardized.

3. The EU gets swamped with African refugees
As part of its recent thaw in relations with Europe, Gadhafi's government agreed to help stem the flow of illegal immigration from Africa to Europe. The Libyan leader has already threatened to pull out of the deal if the EU backs the protesters, and all bets are off if Gadhafi falls. Italy and Malta are especially concerned, as Tunisians are already flooding in. If Libya collapses, the wave of refugees would be "unimaginable," says Italian foreign minister Franco Frattini. "Those who spoke of hundreds of thousands... are not exaggerating." 

4. Market turmoil sinks the global economy
U.S. markets had their biggest drop of the year Tuesday, and global stocks continued their slide, as investors braced for a lengthy battle in Libya. "The market is freaking out" because of the impact on energy prices, says UBS strategist Jonathan Golub. And remember, "the global economy is more fragile now than it was in 2008," when oil last peaked, says Australian broker Jonathan Barratt. If oil prices reach record highs, and stay there, economists say we can kiss the tentative recovery goodbye and say hello to more job losses and another recession.