Weekly update from our research partner Investsense

WHAT: Oil surged from $67 to $120 before settling around $101.
WHY: Oil is going higher and nothing tried so far has been able to stop it. With 10 million barrels per day shut in (the largest disruption in oil market history) even the International Energy Agency (IEA’s) record release of 400 million barrels from strategic reserves barely made a dent. Until the Hormuz Strait reopens, prices are more likely to go up than down.
WHAT: Hopes of a rapid resolution have been extinguished.
WHY: New Supreme Leader Mojtaba Khamenei has vowed to keep Hormuz closed as a "tool of pressure," while Trump shifted from declaring the war "pretty much done" to stating "terms aren't good enough" within four days. Both sides are hardening. Will TACO, Trump Always Chickens Out become Trump-Arranged Ceasefire Outcome?
WHAT: The RBA faces an increasingly uncomfortable position.
WHY: Unlike other central banks, the RBA can't afford to wait this out. Inflation was already above target and capacity utilisation elevated across six of eight industries before the oil shock hit. With headline inflation potentially reaching the high fours, a rate hike at this week's meeting is very much in the discussion.
WHAT: The Australian dollar hit a four-year high above 71.5 US cents.
WHY: Australia's status as a net energy exporter means this is effectively a positive terms-of-trade shock, particularly through Liquefied Natural Gas (LNG) prices. The traditional correlation between the Aussie dollar and risk appetite appears to be breaking down.
WHAT: Equity markets have been surprisingly resilient in some places.
WHY: The Nasdaq continues to hold its ground, while Europe has borne the brunt of selling given its direct exposure to Middle Eastern energy flows. The DAX fell 1.4% in the most recent session and European bond yields surged.
Listen to the Investsense podcast for weekly updates:
Apple: https://podcasts.apple.com/au/podcast/the-investsense-podcast/id1497076117
Spotify: https://open.spotify.com/show/3xR4Vjn77KBpVOj2N15r1p
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