Something for your Espresso: Geopolitical risk premiums on the rise
USD/Oil/Rates open a bit firmer after the atrocious scenes in Gaza/Israel over the weekend.
We have taken a look at the numbers from the last five instances of turmoil in the area:
1) Oil up 80% of the time
2) Yields up immediately in 80% of instances but calm down
3) USD mixed, but since the Oil/USD correlation has flipped a strong USD makes sense now
We generally prefer not to trade/allocate on the back of short-term Geopolitical events, but our Political team will of course follow this situation closely over the next hours.
Chart 1: Oil tends to rally when Israel gets involved in Gaza