BCA Research warns of another turbulent period ahead. According to experts, markets are in for a rollercoaster ride as investors grapple with the impact of the Middle East conflict and a slowing global economy on oil prices.
The research firm has raised the probability of severe oil supply disruptions to 37%. It also sees a 60% chance of a Republican victory in the upcoming US election.
BCA Research recommends that investors increase their holdings in energy stocks, particularly those of North and South American oil producers, as the situation in the Middle East is far from stable.
Tensions in the region remain high, with escalating clashes between Israel and Hezbollah. The recent airstrike on Tehran, resulting in the death of a Hamas leader, has further exacerbated the conflict. Iran has vowed to retaliate after accusing Israel of a deadly escalation of the war. Meanwhile, the US has struck Iraq to keep its troops away from Iranian forces, raising regional tensions and signaling potential future confrontations with American military forces.
In this high-stress environment, investors are closely monitoring global oil markets, anticipating sharp price swings. BCA Research predicts that this volatility could persist for an extended period, specifically until Hezbollah and Iran determine their response.
The broader macroeconomic backdrop exacerbates the situation: global demand is weakening due to slowing US economic growth, China is in no hurry to introduce support measures, and European countries are on the brink of a recession.
Experts also believe that the risk of an oil supply shock will increase following the US election, regardless of the outcome. Furthermore, the heightened tensions in the Middle East could affect markets by influencing the election itself. Coupled with Russia’s restrictions on energy production and exports, this could drive up inflation.
