Base case is somewhat short-lived with oil stabilizing around $90. Little confidence. Severe scenario shifted from $120 to $150 or even $200 a barrel. Equity market response muted, suggesting complacency and vulnerability.

Market conditioned to believe geopolitical crises are short-lived unless hitting fundamentals. Equity market also thinks Trump may back down due to affordability pressures in a midterm election year, leading to oil snapback. Contrast with bond market, which is more concerned about sustained crisis with oil over $100 feeding into inflation.

Possibility conflict ends quickly. But as days pass, risk of protracted conflict increases. Damaged production facilities mean longer restart times, making sustained higher oil prices more likely.

Worst nightmare for central banks—creates dilemma with prices moving opposite to growth. Typically would look through near-term price increases. Longer it goes, harder to ignore given 5 years of above-target inflation. Sees greater likelihood of hikes in UK than US due to stickier inflation. For Fed, came in expecting two H2 cuts; negative progression could remove those. Shifting to hikes more challenging for Fed, easier for ECB/BoE.

Fed will stick to script noting inflation pressures still present, labor market showing weakness. Powell will likely say Fed has to look through supply-driven price increase but keep an eye on it. If sustained, creates bigger dilemma for Fed and global central banks.