We are moving from a price shock to a combined price and demand shock due to war-triggered tipping points. More worried than average due to asymmetrical war dynamics and emerging demand destruction. Sees physical shortages in Asia as another tipping point. Has moved from reduced risk to maximum risk; finds a few names attractive but would not buy the index.

Three/four parties all believe they're winning, making war hard to end. US can declare victory but can't impose outcomes.

In absolute terms, the US will face not just an energy price shock but an inflation shock. This will translate to less spending, especially by lower-income households, creating a demand effect. The sequence is: energy shock ? interest rate shock ? broader inflation shock ? demand shock ? potential financial instability if war continues.

First tipping point was shift from disruption to damage (e.g., Qatar's LNG exports disrupted for 3-5 years). Second is attacks on other infrastructure (e.g., aluminum price up 6%). Worries about a broader shock. Next economic tipping point is actual physical shortages in Asia, which would impact the US via higher import prices and potential product availability disruption.

It's not just about oil; it's about fertilizers, helium, aluminum, and a whole list of things.

1) Massive differential between physical oil price in Asia (~$140-150) and futures needs to converge. 2) Equity mindset is still that this is transitory. 3) Markets aren't pricing in very limited policy flexibility; we've been bailed out by policy before (Fed liquidity, fiscal) but don't have those degrees of freedom now.

There's a real question mark about what the Fed will do, and the US is already running a 6% deficit.