Forget AI, Oil Is The Problem (And Bonds The Solution)

Summary Oil supply shocks, not AI, pose the most acute risk to markets now. Saudi supply disruptions, China's reserve buildup, and Red Sea chokepoints are driving oil above $100, pressuring global rates and risk assets. Elevated oil prices threaten a global recession, and that means bonds could now be the right hedge. A rapid de-escalation in the Middle East could unwind this thesis, but current positioning and fundamentals favor this unloved asset. Looking for a portfolio of ideas like this one? Members of The Pragmatic Investor get exclusive access to our subscriber-only portfolios. Learn More » narvo vexar/iStock via Getty Images Thesis Summary While markets obsess over the AI slowdown, I believe that oil is the real threat to markets. The Iran war has widened to Saudi Arabia, and the buffers that kept crude range-bound This article was written by James Foord 29.71K Followers Follow James Foord is an economist by trade and has been analyzing global markets for the past decade. He leads the investing group The Pragmatic Investor where the focus is on building robust and truly diversified portfolios that will continually preserve and increase wealth. The Pragmatic Investor covers global macro, international equities, commodities, tech and cryptocurrencies and is designed to guide investors of all levels in their journey. Features include a The Pragmatic Investor Portfolio, weekly market update newsletter, actionable trades, technical analysis, and a chat room. Learn more. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in TLT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.