Markets Show Concern Over Hormuz Closure

12/8/2025 6:17:38 PM	medium term cautious up	20 days later	-0.56%	-0.28%
10/3/2025 2:55:16 PM	medium term cautious down	21 days later	+3.37%	-1.69%

12/8/2025 6:17:38 PM	medium term cautious up	20 days later	-1.67%	-0.84%
11/6/2025 9:47:51 PM	short term cautious up	5 days later	-0.68%	-0.34%
10/14/2025 1:51:31 PM	short term down	5 days later	-1.48%	+1.48%
9/17/2025 2:40:32 PM	short term down	5 days later	+0.39%	-0.39%

Asks about the duration of energy supply choke points and when they start to materially impact the economy and corporate fundamentals.

Romaine Bostick

Binky Chadha

When comparing oil prices to prior shocks, you need to adjust for inflation. The magnitude of the current price shock is much smaller than in Russia-Ukraine or 2008. The greater risk is a physical commodity shortage.

Russia-Ukraine got to $145 in today's prices, 2008 was around $185. WTI is just approaching $100. 20% of daily consumption/production goes through the Strait of Hormuz.

Draws distinction with Ukraine war where supply was removed vs. now where supply exists but logistics are choked.

Romaine Bostick

Binky Chadha

The concern was similar in Ukraine—it's about market perception of tail risks, not what eventually happens. Oil proved fungible and recovered, but the risk premium took years to come out.

We have a fair value model for oil with a 30% band. Prices went 50-60% above that and didn't return to the band for years. It's not just about oil prices, it depends on where we end up.

Asks about his historical script that markets become desensitized to headlines in about three weeks, and how much faith to put in that timeline now.

Katie Greifeld

Binky Chadha

On the day Russia invaded Ukraine, I went through the historical script and it worked out exactly. We are at a place where things need to get worse to get better, to put pressure on both sides.

Equity markets are down 4% from highs, oil prices are up, but it's not comparable to prior shocks. The historical script is equity falls 7-8% over three weeks then recovers.

Asks if a Fed policy response (rate cuts) is needed two weeks into the war.

Mentions President calling for rate cuts now on social media.

Romaine Bostick

Binky Chadha

I don't think so. The experience of the 1973-74 oil shocks is that if you accommodate by cutting short rates, the 10-year yield starts going up. We are in a phase where all rates are going up.

If you consider a hypothetical of suddenly cutting short-term policy rates, the 10-year would go even higher.

Asks how much of the small-cap weakness is purely a rates story.

Highlights small caps have been crushed over the past two weeks.

Katie Greifeld

Binky Chadha

Some is a rates story, but what's going on across markets and within equities is de-grossing—cutting overweights and covering shorts. Performance recently has a strong negative relationship with prior three-month performance, with about half coming from positioning.

Same pattern works for sectors, regional equities, asset classes. Some of what's happened in rates is the same story—market got long for other reasons (AI impacting labor market), and shorts are being covered in uncertainty, not a fundamental directional view. When oil prices go up, software did well—that's a clear indication it's a positioning unwind of shorts in software, which were the highest since the global financial crisis.

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