In our latest flash report on the Iran – US/Israel conflict, we discuss the implications of the war for financial markets, with a particular focus on the energy transmission channel and fixed-income markets. The escalation in tensions has quickly evolved into a macro-financial shock transmitted through oil markets, with the Strait of Hormuz emerging as the key transmission channel for inflation expectations, central-bank policy and credit dynamics. In the report, we outline three oil scenarios, assess the macro implications, and highlight the main sovereign and corporate credit winners and losers. While the global economy is less oil-intensive than in the past, a prolonged disruption could still generate inflationary pressures, slow growth and increase dispersion across credit markets.
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