Commodity Bubble Bursts: Stocks Face Inflation Shock

The commodity market has entered a new phase, and it's not looking good for stocks. The Bloomberg Commodity Index has climbed to levels last seen in 2012, while the Quantix Commodity Index has hit a new record high.

Bloomberg macro strategist Simon White warns that the commodity rally is threatening to squeeze corporate margins and household spending, raising questions about how long stocks can withstand an inflation shock spreading well beyond oil.

Commodities are rallying across the board, with energy prices rising sharply - European gas is up 34%, gasoline is up 22% - as well as metal prices (zinc, copper), precious metals (silver, platinum, gold), and softs (sugar, cocoa, corn).

The hobbling of refinery capacity from the Iran war has led to elevated prices for products such diesel and gasoline, inflaming transport costs. Soft commodity prices are being further pressured by the escalation of the Russia-Ukraine war, especially in the Black Sea region.