15.04.2026 - Above pre-war levels
Markets have staged a strong rally over the past days, pushing indices back above pre-war levels. The move appears largely sentiment-driven, with investors leaning on optimism rather than fundamentals.
On the macro side, US PPI, with 0.5% MoM (est. 1.1%) surprised to the downside, offering short-term relief on the inflation front. In contrast, inflation data across Europe showed upside pressure.
Markets: risk-on
Equities: moved higher, with major indices trading above levels seen before the escalation in the Middle East.
Bonds: yields fell back from recent highs - Japan 10y at 2.41%, US 10y at 4.26%
Commodities: oil prices fell based on hopes war ends - WTI USD 91/barrel and Brent at USD 95/barrel. Precious metals rallied - silver above USD 79/oz and gold above at USD 4’800/oz
Currencies: USD fell from recent highs -
Cryptos: falling back from yesterday’s highs - Bitcoin down to USD 74k
Volatility: The VIX fell back to 18
My View: This rally is built on one key assumption: that the ceasefire will hold and the war will end soon which rather looks like a dream to me.
Nevertheless, markets are focusing on the wrong variable. It is not about if or when the war ends, it is about energy flows.
Roughly 20% of global oil supply moves through the Strait of Hormuz. Since early March, flows have been severely disrupted following the attacks of US and Israel on Iran when the Strait of Hormuz got closed. We are now 43 days into this shock. A timeframe that historically would have already triggered a much stronger repricing across assets.
Assuming that the Strait opens today again, it would take weeks to get the energy market and supply back into balance. And shortages are seen across Asian countries while Europe and US just see higher prices at the petrol stations, however also thanks to oil stocks built up in case of crisis.
This disconnect of the markets with the reality is striking. The reason, why I do not put my money on this bet as I do not see equity markets rallying further. Or in case they do, it could end in a disaster.
At the same time, monetary policy expectations remain overly optimistic. In Europe, rising inflation increases the probability that the ECB may be forced into a more hawkish stance, potentially even considering rate hikes. In the US, despite similar underlying inflation pressures, markets continue to price a “best case” scenario, the Fed staying on hold or even leaning dovish.
This reflects a broader belief: that loose monetary policy will continue to support markets. However, liquidity is already elevated. Money supply remains high and is itself a contributor to persistent inflation, making the 2% target increasingly difficult to achieve.
As long as liquidity expectations dominate, risk assets may continue to ignore the oil shock. But, in my view, this comes at a cost.
Valuations may look more attractive after recent volatility. But they do not reflect a sustained high oil price environment. If oil remains at current levels or moves even higher due to prolonged disruption, the repricing could be abrupt.
Markets are once again priced for perfection, in a world that is anything but perfect.
In my main scenario remains unchanged, I see a potential for higher oil prices from here, lower equities, higher bond yields and precious metals with wider swings also higher.
A cautious stance remains warranted.
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