Equity markets rallied to all-time highs as oil price concerns receded, allowing focus to return to earnings which have held up.

Draws parallel to tariff fears a year ago; when those receded, equities rallied. Notes Brent crude peaked near $120, now below $100.

It's a tough call. Equities need earnings support. Economic data likely sideways for next few months due to oil shock lag, posing a headwind.

Notes Netflix disappointment but says other earnings have largely held. Oil shock absorption takes 2-3 months.

Consumer health is key. Growth risks outweigh inflation risks. Elevated oil prices for months will create a quarter of headwind for disposable income and consumption in Q2.

Says inflation expectations should come off table with ceasefire talks. The crucial question is whether consumers dip into savings.

Morgan Stanley had already expected modest H1 growth before the crisis, with H2 support from monetary policy lags and cooling tariffs. The oil shock adds a H1 headwind, lowering global growth forecasts by ~40bps, with impact concentrated in Q2.

If markets look through Q2 to H2, stability should return as policy actions feed through and labor market supports US growth.