West Asia War Not Fully Priced In By Global Equity Markets, Says Jefferies’ Chris Wood

Equity markets have not fully factored in the impact of the West Asian war, said Christopher Wood, global head of equity strategy at Jefferies. According to a report by Business Standard, he said that investors are expecting that the United States would work out something to end the war soon.

“It is now nearly two weeks since the US-Israel attack on Iran and Greed & Fear (Wood’s investment newsletter) has to admit to a certain surprise that there is not yet more collateral damage in the markets,” he said in the weekly newsletter Greed & Fear.

“The explanation for the lack of a more dramatic sell-off in stocks is markets’ continuing assumption that (the United States President) Donald Trump will do another TACO (Trump Always Chickens Out) at any time,” he wrote.

Wood said that the war could end only if Trump does a TACO. Still, it would be important to see what stance Iran and Israel take even if the war subsides.

“This war is only ending quickly if Trump does a TACO, and even then, there is the issue of what Iran’s and Israel’s stance will be.”

Wood said that Russia and China are the two countries that emerged as the real winners of the war.

Among the war tensions, one positive development has been India returning to Russian oil supplies after the US’ 30-day waiver, Wood highlighted.

His comments come amid the Iran war showing no signs of relief on the ground. While Trump has indicated that the war is under control and the majority of US targets have been achieved, Iran has refused to lower its guard. Energy establishments in the region continue to get hit from both sides.

This has led to the production and trade of oil and gas from the Gulf coming to a grinding halt. Oil prices have surged close to 40 percent since the start of the war in late February. From around $70 per barrel, oil has risen to $100 per barrel.

Amid fears of inflation and degrowth across developing economies, equity markets are trading in red.