To understand the market thinking on the war requires an understanding that markets are cold-hearted. The fact that negotiations broke down over the weekend is important, of course, but it’s not the dominant input for markets. Wars between regional powers are not important for global markets. What matters is the ability to get stuff done, and to get hands on stuff. Last week, Iran had control of the Strait of Hormuz. This week, it’s under the control of the US. While remaining a-political, that’s a more market-friendly outcome, on the theory that the ultimate ambition is to re-open the Strait, fully and unrestricted.<\/p>\n
The impact reaction is more nuanced, as in fact the US intervention mutes flows, certainly from Iran. But the bigger and longer term picture is more palatable. From a cold market mindset, even if Israel and Iran were to lob munitions at each other, markets won’t care. Markets will care if the US is in the game, and ramping up risk. As it is, it seems that the US prefers an off-ramp, as long as it comes with the US taking control of enriched uranium, and the Strait gets fully re-opened. Things could change quickly in the coming days, but based off what we know, there has been a landing found in an uncomfortable spot, but in an area that averts a super-bad-case outcome.<\/p>\n
Expect market yields to remain elevated though, as the elevation in energy prices, even if off highs, has been far from solved. Inflation breakevens have managed to ease lower in short tenors, reflecting that mild ratchet away from extremes. But longer tenors yields have come off highs mostly from an easing in real yields. The market is beginning to think about a medium-term activity hit. That said, we continue to view the inflation spurt as the immediate issue that bonds will continue to fret over, keeping long tenor yields elevated.<\/p>\n","protected":false},"excerpt":{"rendered":"To understand the market thinking on the war requires an understanding that markets are cold-hearted. The fact that…\n","protected":false},"author":2,"featured_media":390622,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[114,85,46],"class_list":{"0":"post-390621","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-business","9":"tag-il","10":"tag-israel"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/390621","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=390621"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/390621\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/390622"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=390621"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=390621"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=390621"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}