Summary
1. A critical chokepoint blocked – The hostilities have let to a (almost) complete closure of the maritime traffic within the Strait of Hormuz. This means that the world economy is currently cut off from roughly 20% of global daily oil production.
2. Risk of stagflation rising – For the global economy, this is a classic negative supply shock that should result in a stagflationary dynamic of higher prices and lower economic activity. The longer it lasts, the worse it gets
3. Remaining optimistic – Should the flows of energy resume in the near-term future we estimate the impact on GDP growth would be limited. However, we do not think it would fundamentally derail our optimistic outlook, leaving our 2026 growth forecasts for the US and eurozone above consensus.
4. Equity Markets are taking it easy (for now) – as they appear to have so far only moderately reacted to this deterioration in the risk-reward ratio. Major benchmarks have not entered correction territory and earnings expectations have been surprisingly stable.
5. Sectors do react – Mainly Financials have been suffering, not only considering the economic slowdown but also due to a less favourable yield curve (bear steepening) and to issues in the US private credit market. Some deep cyclicals have also been weak, like Materials, as they are sensitive to higher energy prices. On the other hand, defensives have outperformed.
6. Opportunities in Software and Services? – Risks related to AI appear to be priced in, but potential efficiency gains — and in some cases, entirely new business avenues — may not yet be fully reflected in stock prices.