War/Conflict
US intervention will likely force out Maduro from Venezuela and reopen the economy. This could increase Venezuelan crude production in the long run, a modestly bearish outcome for oil markets over cyclical and structural horizons.
US talks with Russia and China coincide with rising EU-Russia and Japan-China tensions. Stay overweight US assets and long Japanese yen.
Reduce risk exposure in the very near term as President Trump's ceasefire effort falters, Russia tensions spike, and US-China trade prospects suffer.
Russia’s recalcitrance will probably trigger a near-term global stock market correction by prompting larger sanctions and derailing US-China talks. But Israel’s actions do not raise our odds of a major oil shock.
Investors will be disappointed if they buy into the China rally and then Russia escalates the war in Ukraine.
The media is missing the big picture: the war is already contained. The falling oil price confirms that. We fully expect cold feet and volatility incidents in the very near term but there is only a 5% chance of Russia triggering a larger war with NATO – and that is what really matters.
Russia poses an immediate risk to global financial markets, and then perhaps a buying opportunity. Trump is pivoting to ceasefires and trade deals, but Russia could trigger a new tariff shock first.
