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Besides the classic “as expected,” one of the
analysts’ favorite phrases is “markets are talking.” This means that
significant price changes could indicate that something major is coming.
For example, if investors anticipate an increase in
geopolitical tensions that could disrupt supply chains or oil or gas
production, the dollar index, gold,
and even Treasury bonds usually rise.
Right now, investors are experiencing renewed anxiety,
which is good news for those holding long positions in these instruments but
not so good for those facing the potential fallout.
Unlike the previous week, the uncertainty is not the rapid
deterioration of macroeconomic data, which improved in the United States, but
geopolitics again.
In Europe, for example, gas
prices have risen mainly due to the escalating conflict
between Russia and Ukraine and, in particular, Ukraine’s alleged seizure of a
gas metering station in Sudzha.
The concern is that this could disrupt Russia’s last direct
gas supply to the EU through damage or Gazprom declaring force majeure, leaving
Hungary, Austria, and Slovakia without cheap supplies.
However, analysts believe prices will not return to 2022
levels, as this only affects 5% of total supply. They believe that the market
is overreacting and that prices will eventually adjust.
As for oil, it has also been a
turbulent few weeks for black gold. The chart of Brent crude
has been more like a roller coaster: sharp rises and falls. There are several
factors at play.
Initially, worries about a U.S. recession drove prices down
to $75. They then jumped to $82 due to fears of an Iranian military response to
Israel. Now, markets are waiting to see what happens next.
According to Barron’s, a significant escalation could
severely disrupt oil production and transit routes, primarily through the
Strait of Hormuz, through which about one-fifth of the world’s oil supply
flows.
In addition, an attack could lead Western
countries to sanction Iran’s crude oil exports, which
amount to 1.5 million barrels per day, potentially driving up gasoline prices
in the long term.
What will be the long-term impact of both conflicts?
If things worsen and we end up with a worst-case scenario,
energy markets could increase. This would be bad news for both central banks
and the economy in general.
Regulators may be forced to delay rate cuts, putting
additional pressure on businesses, which could be forced into bankruptcy. For
now, however, the market does not believe this will happen.