Bank of America BofA commodity and derivative strategist Francisco Blanch surveyed the global crude market,
“Assuming a conflict that remains contained to Israel and Gaza, we believe Brent may near $90-$95 per barrel, but any escalation involving Iran could trigger a jump to $120- $130/bbl…While keeping the Strait of Hormuz open is key to oil market stability because 17 million barrels cross it every day and prices could spike above $250/bbl if it shuts down for an extended period of time, there are plenty of other energy choke points. Until last year, oil exports from the Persian Gulf would go mostly to China, Japan, and India. But as a result of the Ukraine war and the sharp contraction in European energy imports from Russia, the Suez canal has seen huge growth in crude and petroleum product exports to Europe … In our view, as fund managers and asset owners recalibrate their portfolios to adjust for continued upward inflation risks, we believe there is plenty of room for investors to scale up commodity exposure from $230-billion at present back to historical highs of $350-billion. Our equity derivatives team has noted this year that the correlation between equities and bonds has become positive in the past two years, in turn making oil and commodities an even more important diversifier in multi-asset portfolios”