How Does a Manipulated Spot Price Enable a Profitable Attack?

A manipulated spot price enables a profitable attack by temporarily deceiving a vulnerable smart contract into executing a financial action based on a false valuation. An attacker uses a flash loan to pump or dump a token's price on a specific DEX.

They then interact with a vulnerable contract (like a lending protocol or a derivative platform) that relies on that manipulated spot price for its logic. This allows the attacker to, for example, borrow a massive amount of collateral at an artificially low price before the price corrects, yielding a large profit.