Iran
The longer the Strait of Hormuz remains closed, the more likely the Eurozone will experience an economic recession, as higher energy prices, supply chain disruptions, and weaker global demand slowly grind the European economy to a halt. The relief rally is running out of time. Investors should add exposure to the best-performing sectors following past oil supply shocks: Energy, pharma, and utilities.
The Iran war has damaged LNG production capacity and halted tanker flows through the Strait of Hormuz. We assess the conflict's impact on LNG markets over cyclical and structural horizons.
Red Light. Green Light. So much for the “all clear” in the Hormuz saga.
The Iran war is deescalating further — against our expectations — setting up an aggressive return to the risk-on rally.
The dollar’s pullback masks a quiet improvement in its cyclical backdrop, with growth, monetary policy, and flows turning in its favor. As markets fully price out geopolitical risk, the USD should decouple from oil and better reflect these gains, despite lingering structural headwinds.
Markets may be underpricing a bifurcated political outcome. Unless the Iran deescalation succeeds, the delayed economic fallout from the energy shock could materially worsen Republican prospects and raise the probability of a Democratic Senate victory.
