Oil, geopolitics, and a fragile global supply line
The U.S. is currently allowing Iranian oil tankers to pass through the Strait of Hormuz to keep global markets supplied. Iran is still exporting around 1.5 million barrels per day, though tanker traffic in the region has dropped sharply due to attacks. Some ships supplying India and China are still moving through. Treasury Secretary Scott Bessent says the priority is preventing a global supply shock while tensions remain high. The Strait of Hormuz normally carries about 20% of the world’s oil, and oil prices have jumped roughly 40% since the conflict began, with Brent crude hovering around $102 per barrel. The expectation is that once the conflict stabilizes and shipping protection increases, oil prices could fall well below $80. The U.S. denies intervening in oil futures markets. For now, the strategy is simple: keep the oil flowing, stabilize global supply, and avoid a bigger crisis. Source: U.S. Treasury, market reports
The US private credit exit wave is picking up speed
Cliffwater’s $33B flagship fund capped redemptions at 7% after investors requested 14%—a record, per Bloomberg. Morgan Stanley limited withdrawals to 5% from its North Haven Private Income Fund, and BlackRock recently imposed limits at 9.3%. Pressure spreads as JPMorgan marks down software-linked loans and tightens lending to private credit firms due to concerns over credit quality, loan valuations, and AI disruption. Public BDCs are also under stress: FS KKR Capital ($FSK) saw its NAV premium collapse over 40 points, and Hercules Capital ($HTGC) dropped roughly 30 points. Investors seek liquidity, but options are shrinking. The key question: when will the broader market take notice? Source: FT, Global Markets Investor
In germany, long-term inflation expectations are now rising sharply.
Over a 10y horizon, markets are pricing in inflation of 2.17%; well above the ECB’s 2% target and the highest level since 2024. Source: HolgerZ, Bloomberg
BREAKING: President Trump asks Jerome Powell to LOWER INTEREST RATES IMMEDIATELY to save the economy.
"He should be dropping interest rates IMMEDIATELY," Source: Bull Theory @BullTheoryio
For the first time this year a 2026 rate cut is no longer fully priced
We are witnessing pronounced increases at the front-end of the US yield curve as doubts grew about the Fed’s ability to cut rates this year, even under a new Chair. There are now just 20bps of cuts priced in by the December meeting, meaning that for the first time this year a 2026 rate cut is no longer fully priced. Instead, investors have to look as far out as the June 2027 meeting for the first fully priced cut. Source: CME Fed Watch Tool
Financial stocks this year
- Blue Owl: -44% - Blackstone: -35% - Wells Fargo: -21% - Morgan Stanley: -15% - BlackRock: -15% - Goldman Sachs: -14% - JPMorgan: -13% $OWL $BX $WFC $MS $BLK $GS $JPM Source: Phil Rosen @philrosenn
Speed Matters in Credit Market Downturns
When credit markets unwind, timing is crucial. JPMorgan Chase, with its conservative private credit practices, may be among the first to reduce exposure and trigger margin calls. Early movers often limit losses, as seen with Goldman Sachs versus Credit Suisse during the Archegos collapse, where slow reaction cost Credit Suisse $5.5 billion. Credit cycles punish slow responses, not analysis. As leverage rises and growth slows, the key question is: which banks will be last to adjust? JPMorgan may demand more collateral on private credit loans, signaling declining collateral values since origination. Source: Desiree Fixler @desireefixler
The cost of downside protection is near the most expensive levels on record.
Source: The Chart Report @TheChartReport
