Markets Are Underpricing This Commodity Shock

Interruption of oil flows through the Strait of Hormuz is the key event and implies a material supply shock that markets are underpricing. Expect upward pressure on oil and commodity prices, upward risk to inflation and yields, downward pressure on equities if repricing occurs, and potential dollar strengthening versus commodities as markets adjust.

Analysis

Interruption of oil flows through the Strait of Hormuz is the key event and implies a material supply shock that markets are underpricing. Expect upward pressure on oil and commodity prices, upward risk to inflation and yields, downward pressure on equities if repricing occurs, and potential dollar strengthening versus commodities as markets adjust.