I think even if the president announces this evening that the US is wrapping up this successful mission in the next few days or weeks, I think we will feel the ramifications and consequences of this even in the United States for a very long time. The energy shocks are real and you can't simply flip a switch. And if in fact the United States walks away without any agreement with Iran about the possibility of getting the straight open again, I think then it's quite clear that we may be suffering from the resu ...

Summary of Morgan Stanley Global Macro Forum on Energy Shocks Industry Overview - The report discusses the impacts of energy shocks on the economy and markets under various scenarios, focusing on oil and gas prices, particularly Brent oil and LNG prices [7][39]. Key Points and Arguments Energy Price Scenarios - **De-escalation Scenario**: - Brent oil prices expected to stabilize between $80-90 per barrel, dropping to $75 per barrel thereafter. - LNG prices projected at $23-27 per million British thermal units (mmbtu) in 2026, returning to $10-12 per mmbtu in 2027 [7][39]. - **Ongoing Constraints Scenario**: - 80% of tanker passage resumes within a month, with Brent prices rising to $100-110 per barrel in 2026, returning to $80 thereafter. - LNG prices expected to be $27-32 per mmbtu in 2026, dropping to $15 per mmbtu in 2027 [7][39]. - **Effective Closure Scenario**: - Significant demand destruction required to rebalance the market, with Brent prices potentially reaching $150-180 per barrel. - LNG prices could rise to $32-40 per mmbtu in 2026, returning to $15-20 per mmbtu in 2027 [7][39]. Inflation and Economic Impact - Core inflation sensitivity to oil prices indicates that: - In the US, a price of $130 per barrel could lead to a cumulative impact of 26 basis points on core inflation. - In the Euro area, the impact could be as high as 70 basis points at the same price point [12][39]. Currency Performance - Under different energy price scenarios, currencies such as SEK and EUR are expected to weaken, while CHF and NOK are projected to outperform in the Effective Closure scenario [14][39]. - Emerging Market (EM) currencies like BRL and COP are expected to perform positively under high energy prices, while CEE, MXN, and INR may weaken further [15][39]. Credit Market Insights - The risk premium in US credit markets is deemed insufficient, suggesting a defensive posture is advisable. - In EM sovereign credit, wider spreads are anticipated if growth expectations decrease, with high-yield (HY) lagging investment-grade (IG) in total returns [39]. Asset Allocation Recommendations - Global equities downgraded to Equal-weight (EW) from Overweight (OW), with a preference for US assets due to stronger fundamentals. - Government bonds upgraded to OW from EW, and cash allocations increased to the highest level in years due to uncertainty surrounding oil supply disruptions [36][39]. Central Bank Reactions - Growth forecasts are being revised lower while inflation forecasts are rising, with the Fed expected to remain cautious about transitory inflation amidst softer growth [39]. Additional Important Insights - The report emphasizes the asymmetric outcomes for risk assets, where valuations may remain stable if Brent prices stay low, but could face a sharp sell-off if prices surge [32][39]. - The analysis indicates that the disruption in energy markets has moved beyond logistics to production, leading to higher energy prices across various scenarios compared to previous baselines [39]. This comprehensive analysis provides critical insights into the potential impacts of energy price fluctuations on various economic factors, including inflation, currency performance, and investment strategies.

“All of this is politically inconceivable, but energy shocks lead to some pretty surprising political outcomes.” On “Money Talks”, could the oil shock mean a return to Russian energy? https://t.co/i0V0WWVHle ...

RT Bloomberg Opinion (@opinion)@JonathanJLevin @EconBerger @AndreaFelsted “The US economy’s sensitivity to energy shocks is not what it was. We produce a lot at home. But it still matters for a lot of things,” @JonathanJLevin saysWatch LIVE here: https://t.co/7Y02tnlSn7 ...