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Something for your Espresso: Geopolitical risk premiums on the rise

Oil, USD and rates are up on the back of the increased Geopolitical risks. Will the fundamentals back up a continued move in that direction over the week?
2023-10-09

Morning everyone.

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

Oil, USD and rates are up on the back of the increased Geopolitical risks. Will the fundamentals back up a continued move in that direction over the week?

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