Global Financial Assets Plummet in Sync

Keep a close eye on crude oil trends. Because in this round of volatility, oil prices are more like the lead actor. Many other assets right now are just following its movements and reacting accordingly.
The most important first observation point now: Will oil prices spike and then retreat, or will they stay elevated and refuse to come down? If it's just a sudden jab, the market can catch its breath. But if Brent (the crude oil barrel most commonly used as a reference price in international oil markets) keeps standing above $100 or even $110 and won't come down, then trouble won't be a matter of a day or two—it will start affecting global inflation, corporate costs, consumer confidence, and ultimately stock market valuations too.

Now about gold. Many people find it strange: logically speaking, with war happening, shouldn't gold go up? So why has it fallen to around the 4,850 level instead? Actually, it's not hard to understand. Because the market now isn't just looking at the safe-haven logic alone, but simultaneously looking at interest rates. You can think of it this way: gold does have safe-haven attributes, but if the market simultaneously believes inflation is coming and interest rates will be higher for longer, then gold will also be pressured.

So it's not surprising that Bitcoin is being hammered right now. As the Middle East situation deteriorates and oil prices surge, weak stock markets and a stronger dollar mean investors are increasingly worried about long-term stagflation rather than a short-term shock. Bitcoin taking a hit in this environment is perfectly normal.

The reason US stocks are falling is that once oil prices rise, corporate costs will be higher. Higher costs squeeze profits.

Once profits are squeezed, stock valuations can't hold up.

If inflation is then ignited by oil prices, the Fed will be even more reluctant to cut rates quickly. Then US stocks get squeezed from both sides: one side is rising costs, the other is rates that won't come down. So what really deserves attention right now isn't whether some price level breaks or not, but three bigger things:

First, will the Middle East situation continue escalating to threaten oil and gas lifelines?

If it continues, oil prices will be hard-pressed to come down quickly.

Second, will oil prices stay elevated for a long time?

As long as they stay, inflation pressure won't ease up.

Third, will the Fed keep high interest rates for longer based on this situation?

This will directly impact gold, Bitcoin, and US stocks.

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