The past few weeks have put market analysis to a severe test. When the United States and Israel struck Iran, Tehran responded by closing the Strait of Hormuz, through which about one-fifth of the world’s crude oil passes. The price of Dated Brent, the benchmark for the physical North Sea oil market for near-term deliveries, peaked at $140 per barrel, up from $70 before the conflict—a surge that rippled through the entire production chain. This surge was not confined to energy prices but spread throughout the entire production chain, putting central banks and end consumers in a tight spot.
The macroeconomic picture is difficult to interpret. Central banks find themselves in a very delicate position: the BCE sees inflation revised to 2.6% and growth stuck at 0.9%, a textbook case of stagflation. The Fed has significantly scaled back expectations of rate cuts. De-dollarization is advancing as a structural trend, but for Europe, a weak dollar does not solve its energy dependence.
Meanwhile, the markets have continued to rise. The S&P 500 has hit new record highs in six weeks, marking one of the fastest recoveries from a geopolitical shock of this magnitude. Beneath the surface, however, selectivity is key: this is not indiscriminate risk-on, but disciplined positioning with hedges on oil and interest rates. Artificial intelligence remains a cross-cutting theme, but its energy and geopolitical challenges will eventually need to be resolved.
The second quarter will require careful, long-term-oriented management. Success will not go to those who anticipate the next shock, but to those who know how to adjust course without losing their bearings.
View the Quarterly Analysis prepared by Banca Profilo’s Asset Management Committee to explore the main economic scenarios and investment strategies.
