Oil: Volatility drives cross-asset pricing – HSBC

HSBC’s Willem Sels highlights that Oil remains the primary driver of global markets, with recent Brent swings between USD83 and USD120 underscoring extreme uncertainty. The report notes that Oil prices are likely to stay above pre-conflict levels, keeping inflation concerns elevated and influencing bonds, equities and currencies. Medium-term, lower valuations and reduced positioning may attract investors once Oil flows normalise.

Oil swings dominate global market dynamics

"Our analysis shows that oil remains the number one driver of markets, mattering more than the USD move or risk appetite."

"In just 24 hours, Brent crude oil traded anywhere between USD83/bbl and USD120/bbl, highlighting the extreme uncertainty."

"Markets were working through the consequences of a risk scenario of high-for-longer oil prices, which could hit growth and boost inflation."

"But oil will still remain higher than before the conflict, as we don't know when it will end, how ships will pass the Strait of Hormuz, and how much sanctioned oil could flow."

"For the medium term, we remain of the view that the reduction in concentrated positioning and the lower valuations will help bring back investors when oil starts to pass through the Strait of Hormuz again."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)