Markets Are Underpricing This Commodity Shock

Markets are underpricing the supply shock stemming from the interruption of oil flows through the Strait of Hormuz. Rates are too low, equities too high and the dollar not strong enough relative to the move in commodities.

The disruption has pushed most commodity prices significantly higher, and a quick resolution looks unlikely. What markets are conditioned to treat as a temporary geopolitical event has already turned into a genuine supply shock.