Deutsche Bank strategists caution in their latest report that global stock and credit markets could face a sharp repricing as rising commodity-driven inflation clashes with market expectations of only limited policy tightening from central banks.

The recent bond sell-off has pushed global yields to multi-year highs, yet markets continue to price a benign macroeconomic backdrop: solid growth, contained inflation, and modest rate hikes.

The bank argues this equilibrium is fragile, given that energy, food, and raw material costs keep adding upward pressure on inflation.

Escalating tensions in the Strait of Hormuz stand out as a primary source of risk.

Brent crude is trading near $96 per barrel, European natural gas futures have hit their highest level since early 2023, and prices for wheat, corn, and sugar are climbing.

Still, futures pricing implies an expectation of lower energy costs over the next 12 months.

“If that outlook proves wrong, severe market dislocation could follow, leaving equities and credit assets exposed to downside shocks,” the bank warns.