Oil at $95 is changing trades across markets

The non-stop rally in oil is forcing investors to rethink their bets across global markets.

Airline stocks, currencies of oil-importer nations and bond yields are just a handful of the asset classes already starting to reflect the reality of Brent at $95 a barrel. Meanwhile, strategists from Goldman Sachs Group Inc. and Barclays Plc have rolled out macro reports telling clients how to trade the energy price shock.

With a trio of central bank meetings still to come this week, energy and its potential impact on inflation and economic growth has become the biggest conversation on Wall Street.

"One of the most obvious impact would be for oil prices to derail the trend of disinflation and prevent central banks to cut rates as early as hoped by markets," said Michel Menigoz, head of equity and balanced fund management at Sanso Investment Solutions in Paris.

Dollar Ascendant
Energy is driving a wedge between the foreign exchange of oil importers and exporters. "Almost all currencies weaken against the dollar as a result of a supply oil shock," wrote Themistoklis Fiotakis, head of FX research at Barclays.

In particular, the euro, Japanese yen, Swedish krona and other central eastern currencies are vulnerable, he said, adding that a handful of other exporting countries, such as Brazil and Canada, may be able to weather the broader storm.

Airline Stocks
Costlier fuel is squeezing airline profits, causing investors to sell travel and logistics stocks. The 10-member S&P Supercomposite Airlines Index has fallen 20% since mid-July, making it one of the hardest hit areas of the stock market in recent months.