Morgan Stanley Flags Oil Price Spike as Top Risk to Stocks

Morgan Stanley's Michael Wilson is sounding the alarm on oil prices as the biggest threat to stocks right now. The strategist sees a renewed jump in crude prices as the most serious risk facing US stocks, and recommends energy shares as a way to protect against it.

The surge in crude prices comes from renewed conflict in the Middle East and stalled talks on a lasting US-Iran agreement. This has led to higher energy costs, which makes Chair Kevin Warsh's job of bringing inflation back to its target even harder.

Wilson believes that if oil continues to rise, it will put pressure on the bond market, leading to higher yields on 30-year Treasuries and pulling stock valuations down. He recommends 'quality' companies with steady earnings and robust margins as a hedge against this risk.

The strategist also favors US shares over international ones due to their composition, and believes that chip stocks are unlikely to retake market leadership in the near term.