Oil: The Inflation Pulse — August 17, 2026 [RISK ON]

REGIME: The current verdict is BULLISH, driven by the Alphameter's RISK-ON episode regime, which historically corresponds to a +33.2%/yr return for Brent oil and +27.1%/yr for WTI oil, indicating a strong positive correlation between the regime and oil price action. SENTIMENT DRIVER: The most important headline catalyst is "Shipping slows through Strait of Hormuz after tanker attacks, data shows", as it directly impacts the geopolitical risk premium and adds a supply-risk premium to oil prices, which is BULLISH for oil. ANALYSIS: Through the lens of "The Inflation Pulse", the recent surge in oil prices can be attributed to the widening WTI vs. Brent spread, which indicates a tightening of global oil supplies, and the geopolitical risk premium, which has increased due to the tanker attacks in the Strait of Hormuz. OPEC supply decisions will also play a crucial role in shaping the oil price trajectory, with any cuts in production likely to add to the bullish sentiment. According to the backtest data, oil is one of the cleanest regime splits in the dataset, with a significant difference in returns between risk-on and risk-off episodes. RISK FACTORS: Two specific catalysts that could flip the signal BEARISH for Oil are a decline in the oil price below its 200-day SMA, currently at 77.05, and a recession signal from the US economy, defined as two consecutive quarters of negative GDP growth, which would lead to demand destruction and a risk-off episode. WATCH: The upcoming event to watch is the OPEC Meeting on June 4, 2024, which will provide insight into the cartel's supply decisions and their impact on the global oil market.