Bloomberg Surveillance 3/13/2026
Speakers
Summary
- Oil prices have surged past $100/barrel for the first time since 2022 due to the closure of the Strait of Hormuz by Iran, creating a massive global supply shock.
- The US administration is struggling to contain the crisis, offering mixed messaging on naval escorts and easing sanctions on Russian oil to alleviate pump prices.
- Inflation expectations are rising, with Core PCE coming in hot at 3.1% year-over-year, leading to a repricing of Fed rate cuts, rising bond yields, and a strengthening US Dollar.
- Global supply chains are severely disrupted, with ocean and air freight costs doubling as routes are diverted away from the Middle East and war risk surcharges are implemented.
- Despite the macro headwinds and stagflationary risks, some analysts see the geopolitical shock as transient and recommend rotating out of mega-cap growth into value, small caps, and energy infrastructure.
Trade Ideas
"You're starting to see risk managers tap their PMs on the shoulders and say, we have to cut back risk in aggregate... Once the deleveraging process starts it has momentum of its own." The equity market has not fully priced in the stagflationary impact of a sustained oil shock. As inflation remains sticky above 4%, the Fed cannot cut rates, forcing a broader deleveraging in equities which are currently hovering near all-time highs. SHORT broad market equities as the realization of higher-for-longer rates and slowing economic growth sets in. The conflict resolves quickly, oil prices crash, and the Fed resumes its easing cycle, sparking a massive relief rally.
"The valuations of the euro versus the dollar... will continue to fall as long as oil stays at these levels... we could see much lower prices in the euro versus the dollar. We will start talking about levels of 1.10 in a month's time." The Eurozone is highly sensitive to energy import costs. A sustained oil shock acts as a massive tax on the European economy, driving terms-of-trade deterioration, while the US Dollar benefits from safe-haven flows and a hawkish repricing of the Federal Reserve. SHORT the Euro as the energy crisis disproportionately hurts European economic growth relative to the US. The ECB hikes rates aggressively to defend the currency and fight inflation, or the Strait of Hormuz reopens, collapsing oil prices and reversing the terms-of-trade shock.
"It is an income regime... You can continue to build these investment grade rated portfolios that can yield 6.5%... That allocation, I cannot remember one like that." With base rates elevated due to sticky inflation, high-quality corporate bonds offer historically attractive yields. Investors can lock in equity-like returns without taking on the downside risk of the stock market during a period of intense geopolitical and macroeconomic uncertainty. LONG investment-grade corporate bonds to capture high yields while playing defense against equity market volatility. Inflation spirals completely out of control, forcing the Fed to hike rates further, which would cause bond prices to fall.
"We have continued to focus on this concept of the halo hard assets... Think about things like power plants, gas pipelines, airports, renewable energy projects, really things where there is an ongoing view that we will need these not just for the medium term but for the long term." The geopolitical crisis in the Middle East is forcing countries to prioritize domestic energy security and efficiency. This will act as a massive catalyst for capital flows into domestic infrastructure, utilities, and renewable energy projects that offer stable, long-term value and isolation from global choke points. LONG energy infrastructure and renewable assets as governments and private capital hoard domestic energy supply capabilities. High interest rates make financing capital-intensive infrastructure projects more expensive, compressing returns and delaying project timelines.
"Value stocks tend to be the best-positioned area. Energy stocks tend to do well... And small caps overall have tended to fare better than large caps in stagflationary environments." In a stagflationary environment driven by a supply shock, mega-cap growth stocks suffer from multiple compression due to higher discount rates. Conversely, value and energy sectors benefit directly from higher commodity prices, and small caps historically show resilience during these specific macro setups. LONG value, energy, and small-cap equities as capital rotates out of expensive, crowded mega-cap tech stocks. A severe economic recession crushes small-cap earnings, or the Fed is forced to hike rates, which disproportionately hurts debt-heavy small companies.
"The price of airfreight, you can still fly there, it's just that the prices doubled. The same with fuel prices... There is a huge number of new surcharges coming. Have war risk surcharges, insurance premiums, and then fuel." The closure of the Strait of Hormuz and Middle Eastern air corridors is severely restricting global freight capacity. Logistics and shipping companies are passing these costs onto consumers via surcharges, which can lead to short-term revenue and margin expansion for freight forwarders and carriers who successfully navigate the disruptions. WATCH logistics and shipping equities as freight rates and surcharges skyrocket, potentially boosting near-term profitability. Demand destruction occurs as consumers refuse to pay higher prices for goods, leading to a collapse in overall shipping volumes.
Up Next
This Bloomberg Markets video, published March 13, 2026, features Bob Elliott, Jordan Rochester, Russ Brownback, Olivia Wassenaar, Jill Carey Hall, Ryan Petersen discussing SPY, QQQ, FXE, LQD, XLU, ICLN, ENB, IWD, IWM, XLE, EXPD, ZIM. 6 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Bob Elliott, Jordan Rochester, Russ Brownback, Olivia Wassenaar, Jill Carey Hall, Ryan Petersen · Tickers: SPY, QQQ, FXE, LQD, XLU, ICLN, ENB, IWD, IWM, XLE, EXPD, ZIM