The second quarter will be a period of contrasts. On one hand, falling inflation in some of the world's largest economies (including the United States and the European Union) means that a reduction in interest rates is approaching, which over time should boost economic activity in the developed world and make it easier for distressed emerging economies to tap international bond markets. On the other, Israel's war against Hamas will progressively move northward versus Hezbollah, increasingly raising the risk of an incursion in Lebanon's south. This, in turn, will drive the Yemen-based Houthis to maintain a relatively high cadence of strikes against ships in the Red Sea, which will keep most Western shipping companies using longer (and costlier) routes.
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