The ‘Episodic’ Nature of Supply ShocksRieder also emphasized the critical distinction between short-term commodity pain and long-term economic trends.In a recent post on X, Rieder noted that while near-term inflation expectations have jumped due to energy and geopolitical supply shocks, these events tend to be “episodic.”Rather than signaling a return to sticky, uncontrollable inflation, Rieder explained that these sudden spikes “act more like a tax on consumers.”Rate Cuts Remain On The TableThe recent sell ...

Investors betting on a hawkish response to rising oil prices could be misreading the Federal Reserve, according to Bank of America, which warns that supply shocks can also result in periods of stable interest rates and even deep cuts https://t.co/fua0VOkPL1 ...

Summary of Morgan Stanley Global Macro Forum on Energy Shocks Industry Overview - The report focuses on the macroeconomic implications of energy shocks, particularly in relation to oil prices and their effects on various economies [8][41]. Key Points and Arguments Economic Impact of Supply Shocks - Supply shocks can lead to stagflation, increasing inflation while decreasing growth, with varying sensitivities across economies [8][41]. - Higher energy prices have a more pronounced effect the further they deviate from historical averages [8][41]. - Different countries respond to energy shocks through fiscal or monetary policies, affecting consumer spending uniformly across economies [8][41]. Growth and Inflation Sensitivity by Economy - **United States**: A sustained high oil price could lead to a slowdown in growth and affect consumer spending. A 10% increase in oil prices could push inflation by approximately 30 basis points [9][41]. - **Euro Area**: A permanent $10/bbl increase in oil prices could reduce GDP by 15 basis points and increase inflation by 40 basis points [9][41]. - **United Kingdom**: Similar impacts are expected, with a 10% oil price increase leading to a 10 basis point reduction in real GDP [9][41]. - **Japan**: A $10/bbl increase would add about 20 basis points to CPI, with stagflationary effects expected [9][41]. - **China**: A sustained oil price increase would imply a terms-of-trade hit to GDP of approximately 0.3 percentage points [9][41]. Headline CPI Reaction to Oil Shocks - A 10% increase in oil prices typically adds about 35 basis points to headline CPI within three months, while core inflation is less affected [11][41]. Treasury Yields and Labor Market - Treasury yields have been more closely linked to labor market conditions than inflation surprises over the past two years [14][41]. European Equities and Oil Sensitivity - European stocks show significant correlation with oil prices, with a preference for defensive sectors over cyclicals due to ongoing geopolitical tensions [23][29][33][41]. - The report indicates a tactical caution towards EU equities, expecting underperformance compared to US equities [33][41]. Cross-Asset Allocation - A sustained oil shock could lead to lower growth and higher inflation, potentially breaking the correlation between stock and bond returns, similar to the environment observed from 2021 to 2023 [41][39]. Additional Important Insights - The report emphasizes the need for investors to remain cautious and consider the geopolitical landscape, particularly in the context of Middle East tensions affecting oil prices [33][41]. - The analysis suggests that central banks may adopt a wait-and-see approach in response to inflationary pressures from rising oil prices [41][39]. This summary encapsulates the critical insights from the Morgan Stanley Global Macro Forum regarding the implications of energy shocks on global economies and markets.

So we're trying to piece together really the situation across the Strait of Hormuz and we're looking at various data sets. I'll get to this. There's this vessel, this Iron Maiden vessel.I'm sure you've probably seen the story on the Bloomberg terminal and elsewhere as well. Number one is, let me tell you about Vortex, a fantastic set of numbers. They've dropped these daily updates in our inboxes.And I think the latest one here coming through in terms of relatives vessel volumes through that part of the worl ...