To The Moon

$UBS Group AG(UBS)$ 's latest global macro strategy report and integrating the core insights from BlackRock CEO's interview, a clear signal emerges: the market still holds overly optimistic expectations for a "swift resolution to the Middle East conflict" but severely underestimates the probability of a global recession triggered by surging oil prices. With the Strait of Hormuz remaining blocked and global crude oil inventories being depleted at an accelerated pace, if inventories bottom out by the end of April, a restructuring of global asset pricing logic may be triggered in early May—recession risk has entered the countdown.

I. Dual Warning from UBS & BlackRock! $150 Oil = The "Death Switch" for a Global Recession

As the "lifeblood" of the global economy, oil price fluctuations directly permeate the entire industrial chain: from food production, logistics and transportation, industrial manufacturing to heating, chemical fertilizers, and plastic products, covering almost all aspects of human life. Once oil prices surge to $150 per barrel, it will trigger a fatal negative cycle:

1. Universal price hikes across all categories → Central banks worldwide are forced to maintain high interest rates to combat inflation;

2. Skyrocketing corporate financing costs → Freeze investments and cut jobs to reduce costs;

3. Diminished consumer purchasing power → Cease non-essential spending;

4. Rising unemployment + Plummeting GDP → Recession expectations self-reinforce.

More critically, the Strait of Hormuz is currently blocked by Iran, with the daily supply gap of 9 million barrels being filled entirely by depleting inventories. At the current consumption rate, global crude oil inventories will be in an emergency by the end of April. UBS's model calculations show that the economic damage from oil prices rising from $100 to $150 is not 1.5 times, but 3 times; when combined with recession expectations, the damage could reach as high as 5 times, far exceeding market expectations.

In addition, the market has not fully priced in the risk of "secondary inflation": the Gulf region accounts for 30% of global chemical fertilizer exports. Rising oil prices will directly push up chemical fertilizer costs, which will then be passed on to global food prices, forming a double blow of "energy inflation → food inflation".

II. UBS's Three Scenario Projections: Divergent Asset Trends Based on Conflict Duration

Scenario 1: Swift Resolution Within 5 Weeks (Low Probability)

• Timeline: Conflict subsides in early April, supply chain resumes;

• Oil Price Performance: $Brent Last Day Financial - main 2606(BZmain)$ surges to $120 in the short term before quickly pulling back;

• Asset Trend: $S&P 500(.SPX)$ is expected to reach 7,150 by the end of the year, with risk assets rebounding and recovering.

Scenario 2: Protracted Tug-of-War for 2 Months (Medium Probability)

• Timeline: Conflict persists until the end of May, with repeated supply gaps;

• Oil Price Performance: Peaks at $130, maintaining high volatility;

• Asset Trend: $S&P 500(.SPX)$ tests the 6,000 support level in Q2 and closes around 6,900 by the end of the year.

Scenario 3: Protracted War Until the End of Q3 (Rising Probability)

• Timeline: Conflict continues to escalate, with long-term constraints on energy supply;

• Oil Price Performance: Maintains a high level of around $150 throughout the year;

• Asset Trend: Global economic growth is cut by nearly 100 basis points, S&P 500(.SPX) plunges directly to 5,350 in Q2, with the price-earnings ratio dropping from 22x to 18x, and no real recovery is expected before 2027.

III. Divergent Actions of Global Central Banks: Sharp Contrast Between Easing and Holding Firm

Faced with the dual pressures of inflation and recession, the policy paths of central banks worldwide have shown obvious divergence, with the core logic centered on the priority choice between "controlling inflation" and "supporting growth":

• Federal Reserve (Fed): The US job market has shown signs of weakness, and the Fed will quickly shift to easing once the economy deteriorates. If Scenario 3 materializes, interest rates may return to zero by 2027;

• European Central Bank (ECB): Adheres to the single inflation target, coupled with a tight job market. Even in the event of a recession, it still tends to raise interest rates to curb inflation or maintain high interest rates, with a tougher policy stance than the Fed;

• Bank of Japan (BoJ): Will pause tightening after completing its last interest rate hike this year, and is likely to follow the Fed in shifting to easing thereafter, with continued downward pressure on the yen.

IV. Investment Operation Suggestions: Defense as Core, Seize Structural Opportunities

1. Stocks: Cling to Defensive Attributes, Avoid High-Sensitivity Sectors

• Geographic Selection: Avoid Asia (the hardest-hit area by energy channel blockages) and Europe (dragged down by natural gas dependence), prioritize allocating to US stocks with relatively stronger resilience;

• Sector Selection: Focus on defensive targets with stable cash flow and high dividends (such as consumer staples and healthcare); resolutely avoid automobiles, durable consumer goods, financial services, and heavy-asset industries (the hardest-hit areas by oil price shocks).

2. Bonds: "Cost-Effective Pioneers" Amid Recession Expectations

UBS emphasizes that the current bond market has fallen to attractive levels and has become the first asset class to show opportunities:

• Short-Term Interest Rate Bonds: Market expectations for short-term central bank rate hikes are overpriced, with short-term government bonds from Switzerland, the UK, the US, and India offering outstanding cost-effectiveness;

• Long-Term US Treasuries: The yield curve will peak in Q2 this year, experiencing a short-term shift from "bear flattening" to "bull steepening". If Scenario 3 unfolds, the 10-year US Treasury yield may fall back to 2.50% by 2027.

3. Foreign Exchange & Gold: Seize Opportunities of "Strong First, Weak Later" and "Waiting for Inflection Points"

• Foreign Exchange: The US dollar benefits from safe-haven demand in the short term and maintains strength against Asian emerging market currencies; however, if the Fed launches aggressive rate cuts in the second half of the year, the US dollar will enter a trend of depreciation, with EUR/USD targeting 1.10 and USD/JPY targeting 175;

• Gold: Currently suppressed by high interest rates and a strong US dollar, its safe-haven attribute has not yet emerged. But once recession fears overwhelm inflation concerns and long-term yields turn downward, $Gold - main 2606(GCmain)$ will usher in a sharp rally. It is recommended to take $4,000-$4,250 as the medium-term strategic allocation range;

• Other Precious Metals: Silver, platinum, and palladium have strong industrial attributes and will be under pressure during an economic recession, so allocation is not recommended for the time being.