What If Hormuz Reopens? Market Implications

SEB analyzes the market impact of a potential reopening of the Strait of Hormuz, forecasting a sharp compression in oil risk premiums and a downward shift in global interest rate expectations.

Key Takeaways

• 1.Reopening of the Strait of Hormuz would likely compress the oil risk premium toward $70-$75, down from a current $10 premium.
• 2.Lower oil prices could lead to significant interest rate pricing shifts, with ECB and Fed 2026 end-rates potentially falling by 35 and 25 bp respectively.
• 3.A market rotation into European equities is expected as S&P 500 AI-themed positioning looks increasingly complacent and extended.

Table of Contents

• Summary:
• Oil, Rates & Equity implication
• FX Views