Rabobank’s Senior Macro Strategist Bas van Geffen notes that Oil prices have risen, with Brent futures around $106, as Middle East tensions and disruptions in the Strait of Hormuz intensify. He highlights that futures are underpricing supply risks to both crude and natural gas, and warns that an unavoidable inflation shock and potential stagflationary impact are building for the global economy.

Energy markets underpricing supply risks

"It seems that the lack of talks is gradually starting to weigh on energy markets. Oil prices have crept higher over the week, with a barrel of Brent now trading around $106 in the futures market. Still, we remain surprised at the relative tranquillity in the energy space."

"As our energy strategists underscored in their latest note, “futures markets are still materially underpricing the real supply risk facing both crude oil and natural gas.”"

"An inflation shock seems unavoidable now, and the key question is the intensity and duration."

"However, the longer the conflict in the Middle East remains unresolved, the bigger the stagflationary impact will be."

"Adding further global inflationary pressures, Chinese exporters have begun to raise their prices on “everything from swimsuits to air conditioners,” as oil and oil-related inputs are causing higher production costs across the globe."

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