Get Ready For A Long War And A Much Lower S&P 500

Expect a prolonged Middle East conflict lasting several months with oil supply disruptions and the potential for prices to exceed $200 per barrel. Markets are underestimating the duration and severity, reflected in oil futures backwardation alongside resilient US equities. This implies elevated volatility and meaningful downside risk to growth-exposed assets and inflation upside from sharply higher energy prices.

Analysis

Expect a prolonged Middle East conflict lasting several months with oil supply disruptions and the potential for prices to exceed $200 per barrel. Markets are underestimating the duration and severity, reflected in oil futures backwardation alongside resilient US equities. This implies elevated volatility and meaningful downside risk to growth-exposed assets and inflation upside from sharply higher energy prices.