Besides the classic "as expected," one of the analysts' favorite phrases is "markets are talking." This means that significant price changes could indicate that something major is coming.
For example, if investors anticipate an increase in geopolitical tensions that could disrupt supply chains or oil or gas production, the dollar index, gold, and even Treasury bonds usually rise.
Right now, investors are experiencing renewed anxiety, which is good news for those holding long positions in these instruments but not so good for those facing the potential fallout.
Unlike the previous week, the uncertainty is not the rapid deterioration of macroeconomic data, which improved in the United States, but geopolitics again.
In Europe, for example, gas prices have risen mainly due to the escalating conflict between Russia and Ukraine and, in particular, Ukraine's alleged seizure of a gas metering station in Sudzha.
The concern is that this could disrupt Russia's last direct gas supply to the EU through damage or Gazprom declaring force majeure, leaving Hungary, Austria, and Slovakia without cheap supplies.
However, analysts believe prices will not return to 2022 levels, as this only affects 5% of total supply. They believe that the market is overreacting and that prices will eventually adjust.
As for oil, it has also been a turbulent few weeks for black gold. The chart of Brent crude has been more like a roller coaster: sharp rises and falls. There are several factors at play.
Initially, worries about a U.S. recession drove prices down to $75. They then jumped to $82 due to fears of an Iranian military response to Israel. Now, markets are waiting to see what happens next.
According to Barron’s, a significant escalation could severely disrupt oil production and transit routes, primarily through the Strait of Hormuz, through which about one-fifth of the world's oil supply flows.
In addition, an attack could lead Western countries to sanction Iran's crude oil exports, which amount to 1.5 million barrels per day, potentially driving up gasoline prices in the long term.
What will be the long-term impact of both conflicts?
If things worsen and we end up with a worst-case scenario, energy markets could increase. This would be bad news for both central banks and the economy in general.
Regulators may be forced to delay rate cuts, putting additional pressure on businesses, which could be forced into bankruptcy. For now, however, the market does not believe this will happen.
