Israel-Iran aggression is stagflationary, says Allianz' Mohamed El-Erian

Inflation & Stagflation - One-year inflation dropped significantly from 66% to 51% [1] - Middle East tensions may lead to stagflationary pressures, raising concerns about the extent of this impact [1][2] US Treasury Market - The world is losing confidence in the sovereign side of the US, impacting safe-haven flows into the Treasury market [2] - Investors are distinguishing between the sovereign side and the corporate side of the US, leading to a less pronounced equity sell-off [3] - Investors are gradually reducing US bond exposure, with central banks increasing gold reserves as an alternative [4][5] - Treasury yields have become less predictable, decoupling from traditional correlations [7] Global Economic Order - The global order, which relied on the US, is experiencing a gradual fragmentation [8] - The US is facing policy-induced volatility, which is unusual for the world's most predictable player [9][10] - Market implied probability of recession in the US has fluctuated significantly, from below 10% to over 70% and back below 30%, raising concerns about economic stability [10]