Following airstrikes on Iranian nuclear sites, oil prices surged to their highest in nearly six months, with Brent crude hitting $78. Investors are concerned about potential Iranian retaliation and its effects on global oil supply, particularly regarding the Strait of Hormuz. The FTSE 100 index saw gains from major oil companies like BP and Shell. Analysts warn of significant market corrections if oil supply is disrupted, with potential stagflation and bear market scenarios, depending on the geopolitical landscape.
In this case, a 10% to 20% correction seems likely and we could see a new bear market if the trade war escalates again in early July.
Should the Strait of Hormuz be disrupted and not shut then the inflation shock will be significant, but not enough to derail markets and the economies.
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