No, the market is not accepting a permanent risk premium. Consensus only considers short-term scenarios (days to months), ignoring historical precedents like the 8-year Suez Canal closure. Even a short-term conflict sets a precedent; risk premiums cannot return to pre-war lows as tensions could flare again.

Agrees. Wall Street has been 'fooled too many times' and now treats every negative news event as a buying opportunity, operating that way with the current conflict.

A shortage exists: global consumption is ~103M bpd vs. supply of ~90M bpd. Price must rise and stay high to force a 13M bpd reduction in global consumption. If price falls, demand returns to an unsustainable level. Workarounds (pipelines) would take years.

Agrees $100+ oil may not impair the US economy, but Asian economies (Australia, Philippines) would be under pressure. Much higher prices are needed if the situation is protracted. We'll know in the next week or two.

More inflationary. The key is nominal GDP (real growth + inflation). If inflation rises more than real growth falls (and real growth shows little sign of falling), nominal GDP rises, pushing interest rates up. The Fed should lean toward hiking. Tomorrow's CPI (est. 0.9% MoM) will push YoY over 3% with no commensurate real economy pullback.

It could change substantially in the next couple of weeks if the belief shifts to a longer-lasting risk premium (threat to shipping/oil production). Currently, yields are up but not due to inflation expectations because everyone thinks the conflict is short-term. If the risk premium is seen as more permanent, inflation expectations will kick in and rates will move higher.

There's a reasonable chance. We shouldn't fear rate hikes; they signal strong nominal growth. The narrative that higher rates are always bad is false. In a strong economy, higher rates can be a sign things are getting better.