Investors should not expect a simple 'deal or no deal' binary outcome. The path forward will be a messy, non-linear process involving partial agreements, implementation challenges, setbacks, and renewed negotiations, creating persistent market uncertainty and volatility.
While the Strait of Hormuz remains a key focus, energy supply risks are diversifying. Morgan Stanley observes the potential for disruption across multiple regional chokepoints and alternative shipping routes, creating a more complex and widespread threat to global oil markets.
Geopolitical instability has altered the Federal Reserve's response function. Morgan Stanley economists believe the Fed now requires a more significant oil price shock to trigger a resumption of rate hikes than previously anticipated, suggesting a higher tolerance for energy-driven inflation.