Oil Reawakening, Spike Risk Ahead

Tactically, our current macro theme is “Shaken, Not Stirred.”

Markets have recovered strongly from the initial geopolitical shock, but our timing models suggest that sentiment and positioning are becoming increasingly stretched. The probability of a counter-rotation between “greed” and “fear” assets is therefore rising.

Oil sits at the centre of this potential rotation. Renewed geopolitical tensions, constrained supply buffers and elevated refining margins are creating the conditions for another energy-price shock, with implications extending beyond crude into inflation, volatility and monetary policy.

Oil Reawakening

Oil markets are entering another stress test. Renewed hostilities, disruption risks around the Strait of Hormuz and reduced regional production are keeping the geopolitical risk premium elevated.

The Strategic Petroleum Reserve (SPR) remains an important vulnerability. Following substantial drawdowns in recent years, U.S. emergency crude inventories remain well below previous highs. The SPR still provides a meaningful buffer, but its reduced capacity potentially limits Washington’s ability[…]