The absence of an escalatory crude rally in the presence of the Israel-Hamas war is a recession canary.

So intimated BofA’s Michael Hartnett for at least the third time since the onset of full-on hostilities in Gaza nearly a month ago.

Oil rose 30% after Russia’s Ukraine invasion, but it’s “flat since the Israel-Hamas conflict,” Hartnett said, in his latest. That’s “telling you the world is closer to recession.”

Frankly, it’s “telling you” there’s no discernible supply impact from a contained conflict. There’s no reason why Israel’s ground incursion in Gaza should impact oil prices. Unless there’s state-on-state conflict with Iran, there’s no reason oil should be sharply higher. The market knows that. I don’t care much to litigate the point, though.

Hartnett went on to suggest the Saudis and the Russians “can’t afford” supply cuts (somebody forgot to tell Riyadh and Moscow) and that Western politicians “can’t afford not to improve geopolitics over the next six months” given that 2024 is an election year (there’s not enough time in the day to address that claim).

Hartnett called contained crude a “huge win for central banks” which, he noted, are “now cutting rates at the fastest pace since August of 2020.”

There were 30 cuts over the last three months on BofA’s calculations. All of those would’ve been in emerging markets.

Obviously, developed market central banks are determined to dispense with the idea that rate cuts are likely anytime soon. And there’s still scant evidence to suggest a US recession is any semblance of imminent.

As for “Santa rally” prospects, Hartnett said oil’s failure to surge into the triple-digits, along with longer-end US yields failing to hold a five-handle (even the eccentric 20-year is back below 5%), together bode well, at least for a tactical trade. He did caution that “everyone now expects a big year-end rally” (well, not everyone).

BofA’s semi-famous “Bull & Bear Indicator” gave a third straight contrarian “buy” signal. It registered 1.4 this week.

Finally, rounding out the notables from Hartnett’s latest, he cited the ISM miss, subdued crude and the marginally bond-bullish refunding details while suggesting that 30-year US yields back below 5% is a big deal.

“Bond and stock investors were positioned for 5.5% not 4.5%” on the long bond, he said.