Bob Elliott
· Nonconsensus
· March 27, 2026 at 10:32
· ⏱ 3 min read
| Read on Substack ↗
Summary
The author argues that financial markets are underpricing the tail risk of a prolonged conflict, which could lead to sharply higher oil prices over the summer. While prediction markets assign a 40% probability to this scenario, financial market pricing remains relatively calm, suggesting a potential vulnerability as oil supply cushions are depleted.
•Financial markets appear to be underpricing the tail risk of an extended geopolitical conflict.
•A prolonged conflict extending into the summer could cause a sharp increase in global oil prices.
•Prediction markets show a 40% chance of this outcome, which contrasts with the sanguine pricing in financial markets.
•The global economy is becoming more vulnerable as the cushions to oil supply cuts are being exhausted.