Mohamed A. El-Erian Re-poster

Ongoing fluctuations in the oil sector are here to stay as market instability remains a steady presence. Following a shift in direction earlier this morning, crude values have now dropped beneath the closing levels recorded on Friday, a trend illustrated in the CNBC chart included below. A pair of primary drivers appear to be behind this recent reversal. First, market participants are currently releasing the protective hedges they established prior to a highly unpredictable weekend. Additionally, Treasury Secretary Bessent noted during a CNBC broadcast that certain vessels are managing to pass through the Strait. Consequently, this recent decline in petroleum costs is offering a helpful boost to equities while simultaneously pushing government bond yields downward.

#economy #inflation #oil #markets @SecScottBessent @USTreasury @CNBC

Throughout the past week, we have been examining the danger that energy price shocks stemming from the Middle East War might expand into broader inflationary pressures. Politico recently provided an insightful assessment of this developing situation, pointing out that the ongoing war with Iran is increasing costs for far more than just gasoline prices.

According to their coverage, the financial blow is now reaching children's party balloons, backyard gardens, medical imaging, and semiconductors. This wide-ranging economic impact occurs because Hormuz functions as a primary shipping route for both fertilizer and helium. With vessels currently forming a bottleneck on both sides of the strait, these two essential materials are undergoing immediate price spikes that ultimately affect a vast sector of the overall economy.

#economy #inflation #middleeastwar #markets @politico

We are stepping into a very busy week filled with gatherings of various central banks. For the specific details on the upcoming schedule, feel free to take a look at the weekly note I published yesterday. Right now, the debates surrounding policy decisions are really heating up. This challenge is especially prominent for central banks that operate under a dual mandate, which requires them to carefully balance the goals of achieving maximum employment and maintaining low inflation.

The Federal Reserve serves as a perfect example of this current dilemma. Even before the recent US-Israel attacks on Iran occurred, there was already a clear divide among policymakers. One side was primarily focused on potential vulnerabilities within the labor market, while the opposing side remained much more concerned about persistent inflation.

Currently, the ongoing Middle East War is bringing new stagflationary winds into the global economic picture. These complex conditions are expected to push the differing viewpoints within the Fed even further apart. Given this growing internal divide, there is a strong probability that the Federal Reserve will decide to step back and adopt a cautious wait and see mode for the time being.

#economy #markets #centralbanks #federalreserve #middleeastwar

Media outlets are still keeping a close eye on the private credit sector throughout advanced economies. As an illustration of this ongoing focus, take a look at the provided chart featured in the most recent article published by the Financial Times.

#economy #markets #privatecredit @FT

Torsten Slok of Apollo recently shared an eye-opening perspective regarding the current state of market concentration. He points out that the ten largest companies within the S&P 500 now account for almost 40% of the entire index. As demonstrated in the chart below, this top-heavy dynamic could approach 50% if Anthropic, OpenAI, and SpaceX are added to the mix later this year. The primary takeaway from these figures is that the S&P 500 simply does not offer much diversification anymore.

#economy #markets #investors #investing

H/T LS for the great find. The OECD has put together its 2026 Global Debt Report, and it contains plenty of fascinating statistics to explore. Feel free to check out the complete details using the direct link here.

https://doi.org/10.1787/e9d80efd-en

#economy #markets #growth #debt #inflation @OECD

The state of international markets and the worldwide economy has recently grown far more intricate and unpredictable. I invite you to explore my latest weekly overview of these developing conditions by visiting the resources provided here.

http://linkedin.com/pulse/weekly-look-global-economy-markets-mohamed-el-erian-shp3e/?trackingId=vXKBwDM3QxqdFHY2kfbOrQ%3D%3D&lipi=urn%3Ali%3Apage%3Ad_flagship3_detail_base%3BXcJdDTIXTiGfbxaVzWx6xA%3D%3D

https://open.substack.com/pub/mohamedelerian/p/the-weekly-look-at-the-global-economy-372?utm_campaign=post-expanded-share&utm_medium=web

#economy #markets #middleeastwar

Fuel expenses continue to be a highly delicate issue affecting our societal, political, and economic environments, a dynamic recently examined by the @WSJ. Based on figures provided by AAA, the nationwide average for a gallon of regular gasoline reached roughly $3.68 on Saturday. This price point represents a 23% surge compared to the period right before the war commenced at the end of February.

#economy #oil #markets #gas #affordability

There is still a lingering assumption that resuming the flow of Middle Eastern oil, encompassing both its production and global transit, will be as effortless as flipping a switch when the moment arrives. The reality is far from it. To understand the gravity of the issue, we only need to observe how circumstances have shifted since the war began.

During the first week, the interruptions to both production and transportation were viewed as short lived hurdles expected to last only a few weeks. Moving into the second week, the forecast shifted toward extended delays, with a specific strain on production. Now, as we navigate the third week, overnight events detailed in a previous post indicate that we are stepping into a deeply concerning new phase. We are looking at the possibility of extensive damage capable of paralyzing output for a much greater length of time. Such a prolonged standstill would carry a broader spectrum of potential social, political, and economic impacts.

#economy #oil #markets #middleeasrwar

If financial exchanges were open this weekend, today's economic headlines would certainly be flashing warnings about another major jump in oil prices. Over the course of the night, both factions showed they are ready to cross a serious line by launching direct and substantial attacks on petroleum infrastructure.

Looking at the specific events, the United States conducted bombings on Kharg Island, the central hub for Iranian oil exports. Following this, President Trump shared that he has instructed the Pentagon to "totally obliterate" the military forces stationed on the island. At the same time, the arrival of extra US troops in the region is driving rumors that an occupation of the island might be on the horizon. Iran quickly fired back, warning that all "oil, economic, and energy facilities … in the region ... will be immediately destroyed and reduced to ashes."

These new developments in the Middle East War are adding to the stagflationary winds already affecting the worldwide economy, and the financial fallout would not have stopped at oil. We almost certainly would have watched widespread drops across numerous other market sectors. Naturally, how things actually play out when the opening bell rings on Monday will be entirely determined by whatever happens during the next 48 hours.

#economy #markets #oil #inflation #middleeastwar

Recent data provided by the IMF reveals a fascinating difference in the financial standing of newer companies across the globe. For young firms that were established under 50 years ago, the combined stock market valuation reaches $42.9 trillion in the US. By contrast, businesses in the same age group within the European Union hold a collective value of $5 trillion.

This noticeable gap highlights the boundaries of current European integration. The organization notes that capital markets throughout the region are still fragmented and workforce mobility faces ongoing restrictions. Furthermore, companies frequently encounter a complicated process when attempting to sell their services and products across national borders.

#economy #productivity #growth #markets @IMFNews

Consumers in the US and international regions are seeing clear evidence that elevated oil costs are noticeably driving up prices at the gas pump. These increased fuel expenses are a direct consequence of the Middle East War, a conflict that is now two weeks old. Reflecting this global situation, commodity markets finished the week with Brent crude settling at $103 per barrel and WTI closing at $99.

This negative strain on everyday affordability is being heavily magnified by climbing mortgage rates, which currently sit above 6 percent. As these financial pressures combine, the chances of experiencing a much wider impact on the general cost of living continue to increase with each passing day.

#economy #oil #energy #markets #affordability #inflation

Today the Financial Times shared its perspective on the newly revised US fourth quarter GDP statistics. If you happened to read my previous post discussing the consumer spending figures that also came out today, you will spot a familiar trend. These updated Q4 GDP numbers reveal that the American economy was already experiencing a decrease in dynamism during the period immediately preceding the War. Furthermore, the economic consequences of this conflict are introducing stagflationary elements right as broader concerns surrounding financial stability are beginning to increase.

#economy #gdp #growth #markets @ft

Based on the US economic data published today, the previously strong momentum of consumer spending had already started to cool down just before the Middle East War began. At the same time, inflation is proving quite stubborn. When looking at core PCE, which is known as the preferred tracking metric of the Federal Reserve, inflation levels have continuously exceeded the official target set by the Federal Reserve for the sixth consecutive year. For a deeper breakdown of these details, please refer to the Bloomberg table provided below.

#economy #markets #growth #inflation

Prospective buyers and current homeowners are encountering a dual challenge of climbing mortgage rates and a shrinking selection of loan options. Because financial institutions are holding out for improved market visibility, many lenders are actively pulling specific products from their portfolios, which directly reduces the overall home loan supply available to the public.

The primary catalyst behind these shifting conditions is the latest performance of UK 10-year government bonds. The yield on these bonds crossed the 4.80% threshold today, demonstrating an upward trajectory that is once again increasing at a much quicker pace than what is currently being observed in the majority of other developed nations.

#economy #uk #mortgages #markets #middleeastwar

We are currently navigating a financial landscape filled with unpredictable and fluctuating relationships, a reality that is evident even among the G7 nations.

A few recent events serve as excellent examples of this unpredictability. Ordinarily, one would not anticipate market discussions regarding a depreciating currency during a time when government yields are climbing. In spite of this general rule, that precise situation just took place in Japan.

Along similar lines, standard economic logic suggests that bond yields should decline following a shortfall in GDP growth. The events in the UK this morning, however, completely broke away from that conventional expectation.

#economy #markets #japan #uk

As a follow up to the JPMorgan announcement from earlier this week that was discussed in a previous update, Bloomberg has shared some interesting insights on the concept of back leverage. The outlet reports that private credit funds are currently finding themselves in a highly defensive position. This is due to an unprecedented wave of investors leaving the space, paired with multiple borrowers failing to meet their debt obligations. Because of these mounting pressures, these funds are now getting ready for a confrontation with the major banks, which have historically acted as their primary lenders.

#economy #markets #privatecredit #banks

Another for the list of unintended consequences of the war in the Middle East. (And you can also add the partial easing of sanctions related to Russia’s invasion of Ukraine.)
#exonomy #markets #middleeastwar #sanctions #russia @FT

Per the @FT headline below, UK monthly GDP was unchanged in January, signaling a lack of growth momentum even before the economy faces the adverse effects of the Middle East War—namely, higher energy prices and rising borrowing costs, with the looming risk of job losses and, even, heightened financial instability to follow if the War is protracted.
#economy #markets #uk #middleeastwar

Quick economic and market update:
On the surface, the overnight session appeared calmer than the previous two weeks—at least judging by oil, U.S. rates, and futures, all of which are essentially unchanged.
Below the surface, however, tensions remain with, this time, parts of the currency market flashing yellow as the yen slides to its weakest level since July 2024.
#economy #markets #middleeastwar