Stephen Dover

India is well known as dependent on oil. Of course, India is probably less known, but also dependent on natural gas and fertilizer as well... harder hit than other countries. Because India imports the vast majority of its energy through the Strait of Hormuz, the blockade directly cripples its economy, causing the Rupee to hit record lows, forcing commercial gas rationing, and triggering foreign capital flight. India's structural reliance on imported Middle Eastern energy makes its equity markets highly vulnerable to the ongoing geopolitical blockade. Diplomatic negotiations securing safe passage for Indian tankers could rapidly alleviate the energy shortage, sparking a massive relief rally in Indian equities.

We're in essence, short duration... we don't think any more that there are going to likely be interest rate cuts. A 30% spike in oil prices acts as a tax on growth while simultaneously pushing headline inflation up by roughly 25 to 30 basis points. This stagflationary environment forces the Fed to abandon rate cuts, which destroys the value of long-duration bonds. Short-term Treasury bills provide a safe, high yield without the duration risk associated with sticky inflation and delayed central bank easing. If the energy shock causes a severe, immediate recession that destroys demand, the Fed may be forced to cut rates anyway, causing long-duration bonds to outperform cash.