2025-06-27 02:04Investment Rating - The report indicates that the biggest economic risk to economies and markets remains via an oil shock, with oil prices expected to spike above USD 80 per barrel due to potential closure of the Strait of Hormuz [8][3]. Core Insights - The conflict in the Middle East, particularly the US strikes on Iranian nuclear sites, has intensified uncertainty in global economies and markets [2]. - Oil prices are projected to rise significantly, with a potential increase to above USD 80 per barrel, reflecting a higher probability of a Hormuz closure, which is critical as approximately 18% of the world's oil passes through this strait [3][8]. - The report outlines four key risk channels for global equity markets: oil prices, freight and trade, geopolitical risk premiums, and tourism [4][33]. Summary by Sections Oil Market - Following US strikes on Iran, oil prices are expected to rise due to increased risk premiums, with forecasts suggesting Brent prices could reach USD 67 per barrel in Q2/Q3 and USD 65 per barrel thereafter if supplies are not disrupted [14][8]. - If oil supplies are disrupted, there would be an upside risk to oil prices, although this may eventually be capped by ample OPEC+ spare capacity [14]. Economic and Market Impact - The direction of exchange rates will largely depend on oil prices and the speed of their increase, with potential strengthening of the USD as a safe-haven currency [25]. - The report suggests that while the conflict does not pose a meaningful threat to economic stability in the Gulf, increased uncertainty may negatively impact sentiment, particularly in travel, trade, and tourism sectors [4][26]. Geopolitical Risks - The escalation of conflict between Israel and Iran poses downside risks to emerging market equities, with investors potentially rotating from Gulf Cooperation Council (GCC) countries to Latin America [33]. - The report emphasizes that the biggest risk to economies and markets remains through an oil shock, with trade costs and tourism impacts also being significant [14][32].