This post provides a great breakdown of the Geopolitical Risk Premium, illustrating how markets don't just react to current events, but "price in" the probability of future supply shocks. It’s a vital reminder that in energy markets, perceived risk is often as influential as physical supply and demand.
As global economies gradually diversify their energy sources, do you believe the "oil risk premium" still holds the same power over the broader stock market as it did during previous conflicts, or is its influence beginning to wane?
I think it still holds power, but the transmission channel has evolved. The economy is less oil-intensive than in past decades, so the direct growth shock is smaller. However, oil still heavily influences inflation expectations and policy assumptions. That’s the real leverage point today. It’s less about physical dependency and more about its impact on rates and liquidity.
I like to read the cause and it's consequences and this post is exactly doing that. Great.
Grateful for that. The goal is always to connect the event to the macro ripple effects.
This post provides a great breakdown of the Geopolitical Risk Premium, illustrating how markets don't just react to current events, but "price in" the probability of future supply shocks. It’s a vital reminder that in energy markets, perceived risk is often as influential as physical supply and demand.
As global economies gradually diversify their energy sources, do you believe the "oil risk premium" still holds the same power over the broader stock market as it did during previous conflicts, or is its influence beginning to wane?
I think it still holds power, but the transmission channel has evolved. The economy is less oil-intensive than in past decades, so the direct growth shock is smaller. However, oil still heavily influences inflation expectations and policy assumptions. That’s the real leverage point today. It’s less about physical dependency and more about its impact on rates and liquidity.
Thank you for the knowledge!