BNY’s Bob Savage highlights that Oil supply shock risks look underpriced even as prediction markets see high odds of crude reaching $100/bbl. He notes strong investor flows into Energy equities across regions and describes Oil as a new safe haven. However, he warns that sustained high crude prices could act as a consumer tax and pressure growth equities.

Safe-haven flows and demand risks

"The risk of an oil supply shock appears underpriced even as prediction markets assign 50% to 80% odds of oil reaching $100/bbl."

"The rush to own oil has been notable, making it one of the clearest new safe havens."

"Investors’ ability to look through the current crisis and see value in energy will depend on the balance between inflation and demand destruction."

"Energy is viewed as a win-win investment, given the supply shock and the structural uptick in capex linking materials and industrials, particularly defense and data centers."

"If crude sustains levels closer to $100/bbl, as it did at the start of the Ukraine-Russia war, inflation expectations may firm, reinforcing higher-for-longer rate dynamics and pressuring duration-sensitive growth equities, particularly given that 44% of the S&P 500 is tied to tech, AI and credit-linked themes."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)