The cause of any further oil price gains will be key in determining how equity markets react, Bank of America Merrill Lynch says.
If oil continues to be driven by ample liquidity - arguable the most likely scenario - then the short-term broad risk asset rally is likely to peter out once growth starts to suffer, hitting equity markets, it argues.
In that case, stock markets in the United States and commodity price-setters should hold up better than Europe "as they are mostly price takers for energy and raw materials", BofA ML strategists say.
If demand - due to genuinely stronger global economic growth - takes over as the main fuel for energy prices, equities should fare better.
"In the short run, European stocks would probably outperform as currently EU markets are behaving in large part as a play on global growth. In the longer run though, the U.S. is better placed due to increased efficiency gains from a growing price elasticity of demand and large increases in domestic production capacity leading to reduced U.S. foreign oil import dependency," BofA ML adds.
The third option, a supply side shock, is the biggest worry for investors in risky assets. For Europe, the negative impact could be augmented by euro weakness, and its peripheral markets may be the worst hit, BofA ML says.
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