Update from the Flightdeck

Markets dislike uncertainty. They dislike a disrupted oil supply even more. The escalation in the conflict between Iran, Israel, and the United States has injected both into the system at once. Equities are mostly lower this morning, oil prices are sharply higher, and gold caught an immediate bid. The geopolitical risk premium, largely dormant this year, is back on the screen.

The focal point is the Strait of Hormuz, through which roughly a fifth of global oil flows. Markets are not pricing a full closure yet, but they are pricing disruption. Insurance costs rise first, shipping reroutes next, and inflation expectations follow. Brent spiking double digits tells us positioning was complacent.

The complication is macro. Central banks were edging toward easier policy, but higher energy prices complicate that trajectory. Sticky inflation combined with geopolitical instability is an uncomfortable mix. A stronger dollar and higher Treasury yields suggest investors are beginning to position for a different regime.

For now, financial conditions are softer rather than panicked. That distinction matters. This is not 2022 redux. Investors have seen enough regional flare-ups fade to hesitate before hitting the sell button aggressively. Credit spreads and volatility indices will tell us whether this remains a repricing of risk or something more structural.