Global briefing: Geopolitics & inflation/ US rates/ Middle East escalation/ China diplomacy/ Safe havens

In this week’s global briefing:

1. Geopolitics & inflation: Firms are increasingly redesigning supply chains in response to geopolitical risk, leading to higher costs and inflationary pressures.

2. US rates: An increasingly unsustainable US fiscal path is placing upward pressure on longer-term US rates. But it’s not obvious that bond vigilantes will win.

3. Middle East escalation: The likelihood of regional escalation of the conflict in Gaza is higher than priced in, which would have substantial global spillovers.

4. China diplomacy: Western relations with China are stabilising: PM Albanese has visited Beijing and Presidents Biden and Xi will meet soon.  But don’t over-interpret.

5. Safe havens: Markets are beginning to respond to elevated levels of geopolitical risk: safe haven assets like the CHF and gold are at close to record levels.

The full note is available at: https://davidskilling.substack.com/p/global-briefing-geopolitics-and-inflation