Henry Allen at Deutsche Bank says Brent crude Oil above $100 has not triggered a 1970s‑style shock because markets still discount a short conflict and lower prices ahead. He points to a sharply backwardated futures curve, with 6‑ and 12‑month Brent well below spot, and argues that this limits how aggressively other asset classes price stagflation risk.

Backwardation tempers stagflation concerns

"Today, markets continue to believe that the conflict will be short, as we can see from the energy futures curve."

"First, and arguably most importantly, markets are still pricing in a temporary conflict, and a sharp pullback in oil prices in the months ahead."

"In other words, markets aren’t pricing in a sustained oil shock like we saw in 2022 (when 6-month Brent futures did climb above $100/bbl)."

"So given today’s crisis doesn’t yet meet the severity thresholds of past oil shocks, the more limited market reaction makes sense."

"So long as that belief remains the case, and markets don’t expect a sustained stagflationary shock, then it’s no surprise that we haven’t seen the declines experienced in the oil shocks of previous decades."

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