How much longer? - Our weekly cross-asset views

This was another risk-off week dominated again by energy price gains (+8% wtd) and volatility, bond bear flattening, hawkish market repricing of central banks rates, widening inflation B/E, US dollar strength and higher volatilities. Equities and credit are down moderately, but US resiliency eroded somehow (-SPX -1%; SPW -2.3%).Given the magnitude of the potential oil disruption, the most likely scenario in our view involves massive and coordinated efforts to reopen the Strait of Hormuz. But this path carries substantial risks, given the still ongoing escalation between US, Iran and Israel leaders, and also given the increased political instability within Iran itself.Needless to say that the longer the disruption persists, the higher the stagflationary risks become, as highlighted in our cross-expertise publication Middle East Conflict: Counting the Shocks on the Global Economy and Impact on Financial Markets. In this environment, equities and credit markets may well become more asymmetric than bonds in the short run.