Amrita Sen, founder and director of market intelligence at Energy Aspect, warned that global economies may be “sleepwalking” into a significant recession due to an underestimation of the ongoing oil price shock. Despite the S&P 500 reaching an all-time intraday high of 7,230.12 last week, Sen argues that the surge in oil prices—up over 50% since the U.S.-Iran conflict began—should be driving equity markets lower, not higher. She highlighted a misplaced optimism among investors, who are overlooking the broader implications of rising energy costs.

The ramifications of elevated oil prices are far-reaching, impacting not only energy markets but also commodities like LNG, chemicals, and fertilizers. Sen anticipates that oil prices could stabilize between $80-90 per barrel, which will likely lead to increased food prices due to disruptions in urea transport and natural gas supply. Meanwhile, Morgan Stanley’s Jens Eisenschidt noted rising tensions within various sectors, including airlines and manufacturing, signaling a potential “day of reckoning” for markets.

The key takeaway for market professionals is to reassess the resilience of equities in light of persistent energy price pressures, as the current optimism may not hold in the face of deteriorating economic conditions and inflationary risks.

Source: cnbc.com